- 4th Floor, Plot No-90, Sector 44, Gurugram-122003, Haryana, India
Risk can be understood as the probability of an event and its related consequences. All the various processes, methods and tools for managing these risks come under Risk Management.
Risk management highlights identification of things what could go wrong, evaluating the strategies to be used dealing with these kinds of risks and off course implementing these strategies to deal with such risks. All corporate houses which have a risk management plan in place are better prepared in case a situation arises and also has an effective & efficient way of dealing with such risks.
Let’s try to understand the following:
• How to identify these risks in your business?
• How to formulate an effective risk management policy?
• Implement a program which enhances the overall success rate of any business and reduces the failure chances.
Risk management process or plan enables any business to not only identify but also address the risks which can occur during any phase. It increases the success rate by ensuring that the businesses objectives & goals are met. Needless to say, that risk management plan should be devised and come under strategic management.
The risk management process (RMP) involves the following steps:
Identifying risks – Identification/Understanding the risks involved/could evolve by studying all the factors – internal as well as external related to the said business.
Analyzing risks – Analyzing how the business outcomes &objectives might change due to the impact of the risk event. It also includes the calibration and creation of probability distributions of outcomes for each risk.
Responding to risk – After identifying and analyzing the potential risk for any business, appropriate plan/strategy needs to be incorporated. This can be done by the following steps (depending on kind and severity of the risk):
Avoid
Mitigate
Transfer
Accept
Monitoring risk and opportunities – Continually monitoring & measuring the risk response plans, Track Identified Risks, Evaluate Risk Process Effectiveness and opportunities of the businesses.
The main categories of risk to consider are:
1. Strategic Risk – chance that a strategy will result in losses.The following are examples:-
Liability Risk.
Marketing Risk.
Change Management.
Program Risk.
Project Risk.
Competitive Risk.
Innovation Risk.
Merger & Acquisition Risk.
2. Operational Risk – Risks arising from catastrophic events.The following are examples:-
Human Error
Information Technology
Lack of Processes
Quality Risk
Process failure
3. Financial Risk – Risks faced by the business in terms of handling its finances. The financial risk ratios should be used to assess any prospect. The following are examples:-
Credit Risk
Liquidity Risk
Asset-backed Risk
Foreign Investment Risk
Equity Risk
Currency Risk
4. Compliance Risk – Risks occurring due to non-compliance of industry laws and regulations, internal policies or prescribed best practices. The following are examples:-
Environmental Risk.
Workplace Health & Safety.
Corrupt Practices.
Social Responsibility.
Quality.
Process Risk
5. Reputational Risk – Risks occurring due to negative publicity, public perception or uncontrollable events. The following are examples that could lead to such risks:-
Accounting
Information Technology
Executive Management
Quality Risk
Operations
6. Competitive Risk – Risks occurring due to negative publicity, public perception or any other uncontrollable event. The following are examples that could lead to such risks are:-
Pricing
Innovation
Locations
Promotion
Intellectual Property
Distribution
7. Legal Risk – Risks occurring due to negligence in compliance with the laws related to any business.The following are different types of Legal risks:-
Assets
Regulatory Risk.
Compliance Risk.
Contract Risk.
Non-contractual Rights & Obligations
Dispute Risk.
All the above categories are not rigid and some parts of the business may fall into more than one category.
Geopolitical & environmental risks, force majeure including natural disasters
Employee risk management, political and economic instability
Health and safety risks.
Risks are inherent to every environment and any business. The risks cannot be avoided and, therefore, must be addressed in order to minimize their impact.
Below are the four main steps to evaluate the risks:
1. Identification
Risk identification is the main step and can be achieved by simply brainstorming the possible scenarios. You can gather the employees together in order to review all the sources of risk for your business. The next step is then to arrange all these identified risks in order of priority& severity. This ensures that risks which can affect a business significantly are dealt with immediate priority.
2. Assessment
This can be done by following the below steps:
Identify hazards, i.e. anything that may cause damage
Decide who may be effected/harmed, and how.
Assess the risks and take appropriate action.
Make a record of the findings for future use.
Review the risk assessment.
3. Developing
Develop preventive mechanisms for identified risks
Action plan in case it reoccurs
Business risk can originate from areas—internal to the business and from other external sources. The best ways for any business to manage risk is to evaluate risk factors and make a contingency plan around it which highlights the steps to be taken in event of such a scenario across all the three categories of risks:
Category I: Preventable risks
Category II: Strategy risks
Category III: External risks
1. Write a business plan
The process of creating a business plan is a vital step towards assessing, evaluating &planning for the risks associated with any business. The plan should cover all aspects like operations, finance, marketing& execution related to business. It should encompass the following:
Executive summary — a snapshot of your business
Company description — describes what you do
Market analysis – research on your industry, market and competitors
Organization and management — your business and management structure
Service or product — the products or services you’re offering
Marketing and sales — how you’ll market your business and your sales strategy
Funding request — how much money you’ll need for next 3 to 5 years
Financial projections — supply information like balance sheets
Appendix — an optional section that includes resumes and permits
2. Determine insurance needs and obtain coverage
Depending on the business activities, you need to determine the other types of insurance and obtain the correct coverage for your business. Insurance will not reduce your business’ risks but you can use it as a financial tool to protect against losses associated with some risks.
You can use a business interruption policy to insure against loss of profit and higher overheads resulting from any internal factors.You may also want to consider:
Products liability insurance – Is designed to pay for any compensation and legal costs that may arise from negligence or breach of duty by any employee of the business.
Group life assurance – Is provided by employers as part of a benefits package and pays out a lump sum to the employee’s family in case of any shortcoming.
key man insurance – Is used to cover for the financial costs of losing any key personnel.
3. Write a risk management plan
Create a risk management plan (Separate from your existing business plan), which lists all of the possible risks that can affect your business. This risk management plan also lists the steps, procedures &ways in which the business should react/deal with the risks as they arise. Other key components are:
Definitions.
Assumptions.
Process
Budget
Risk Breakdown Structure.
Probability Impact Matrix.
Accuracy Estimates (cost & schedule)
Roles & Responsibilities
Risk Register.
Steps in developing a risk management plan (RMP) are as follows:
Establish the basic approach and working structure
Develop and document an overall risk management strategy
Assign responsibilities for specific areas
Describe the assessment/analysis process
List potential risk and their impacts
Develop mitigation strategies
Establish reporting/tracking procedures
4. Update plans.
Even the best of plans at times do not cover all the situations associated with any risk which can happen to your business so when it happens react accordingly and then edit/update your existing plan &procedure so that it can be used as a ready reference in case of any re-occurrence.
5. Train employees
You should train your employees to not only understand the interpret the risk management plan but also how to deal with the situation when the risk occurs. This can help your business from damages.
6. Sack and recruit employee
Demand sacking and recruiting new workers where necessary for the health of your business.
Managing risk is very different from managing strategy. Risk management focuses on the negative—threats and failures towards the business rather than opportunities and successes of a business.
5 things to remember in order to manage business risk:
Accept the risk
Avoid the risk
Transfer the risk
Mitigate the risk
Exploit the risk
Sumeet is endowed with 23 years of global experience reflecting strong leadership qualities coupled with enormous experience & exposure in IT projects’ planning, execution, management, delivery and production support (onsite, offsite and offshore); across e-Business, Client/Server, Custom Application Development, Enterprise Resource Planning (ERP), Enterprise Content Management, Internet based applications, Business Intelligence, Integration packages and Databases. Eminent leadership expertise with exemplary record in driving management methodologies and disciplines spanning estimation, contracting, project planning, risk management, progress tracking & analysis, report and other related factors Well versed in project management methodologies of Agile, Scrum, Waterfall and delivery technicalities of Onsite, Offsite and Offshore model with expertise in translating complex business opportunities into creative, effective and efficient IT solutions, analyzing the client business needs and requirements: translating new ideas into clients’ solutions including opportunity identification, requirements development, delivery, production support & analysis and documentation.
Jayanti, a proactive founder brings more than 21 years of rich industry experience with an insight to provide innovative solutions. A leader and a team player who aims to help an organization achieve its objective through new and innovative ideas. Her spectrum of work varies from IT Education Delivery, Instructional Design and Delivery, content management and development. She understands the need for building collaborative and trusted relationships with the clients. Jayanti exudes remarkable calm, confidence to withstand the challenges in setting the tone for the company’s values, ethics, and culture.
Nidhi has 15 yrs. of experience in Business Research, Talent Acquisition, Client Relationship management, Database Search Tools and Leadership Hiring. She has worked with internal teams and hiring managers in UK, Continental Europe and US geography to assist with recruitment efforts. She has also worked on custom projects in different sectors and industries, involving – company profiling, business overview, business segments, key financial, executive team, board member composition, competitors and other key developments.
She has been instrumental in preparing presentations on the key developments in the business world like Digital Transformation, UK Talent Trends, Digital Age Disruption. She has been involved in working on newsletters pertaining to candidate moves, company mergers & acquisitions and layoffs in US, UK, CE, APAC.
Priyali has around 8 yrs. of product and digital media experience, along with background in Product Marketing.
She has helped publishers in transforming their digital media business and reinvent their digital monetization model with data driven decision making and an effective web and mobile optimization strategy to increase revenue, website traffic, user engagement, and gain competitive advantage.
Through her specialties like Product marketing, lead generation, digital media consulting, web optimization, user engagement, content monetization, product optimization, customer success she has delivered products that are user friendly and provided a unique and consistent value to the customers.
She has worked closely with cross-functional teams, including Product Management, Sales, Marketing, Research, Web development and Design along with customers, to ensure the successful roll-out of new products and new versions of existing products.
Nitin Gupta, Business Development Manager at IvaluePlus has more than 21 years of experience in all aspects of business development, previously working in the F&B domain and has now transitioned his focus to IT/ITES domain.
His key areas encompass increasing the top line of the company by identifying and developing new business areas & opportunities. He is instrumental in leading cross-functional teams, manage existing partnerships, and evaluate company business goals
A proactive, advising, strategic and result-oriented account manager who maintains a strong link between the team & the clientele – stakeholders. She understands client’s requirement & plans out ways to achieve the required business objective. She is a people’s person and keeps thy team going in sync & flow. She dives deep to understand the business severity & aims at deliverables. She has experience in intercultural sensitivity, workforce planning & employment, language skills, Lisha has been instrumental in building company’s human capital capability through keystone involvement and systemic value addition.
Spending almost a decade into Arts & Entertainment industry and now stepping into Human Resources, right from Hiring to Training to Generalist HR, it has been quite a journey for her but it’s all about getting everything together. The motto is to learn, evolve & grow.
Sujeet is an Ambitious and self-motivated with 7+ years of professional experience In Finance. He has done his B.COM & M.COM from Kumaun university Nainital.
He has been instrumental in Financial accounting /Direct and Indirect taxes/ Payroll and Compliance Management specializing in the IT/ITES sector. He posses excellent research and financial analysis capabilities.
Highly capable, versatile and accomplished IT professional who is confident to make the right decisions as per the situation.
His experience encompasses good knowledge of Cisco, Aruba, D-Link, Sophos, TP-Link devices, Setting up of IT infrastructure from scratch to a secure fort, extensive IT management experience, planning and implementing computer systems and networks.
Please share your email id to download the brochure.
Please share your email id to download the brochure.
Please share your email id to download the brochure.
Please share your email id to download the brochure.
Please share your email id to download the brochure.
Please share your email id to download the brochure.
Please share your email id to download the brochure.
Please share your email id to download the brochure.
Please share your email id to download the brochure.
Please share your email id to download the brochure.
Please share your email id to download the brochure.
1 Comment
Thanks for sharing. I read many of your blog posts, cool, your blog is very good.