A process of asserting or evaluating the chances of loss and taking possible methods to reduce or prevent the potential risk to an acceptable level.
For example: -
When a bank gives a loan to the customers, bank take appropriate measures to determine whether the person will be able to pay the loan amount or not.
Risk management in business involves identifying, evaluating and prioritizing risk by using appropriate resources for minimizing, controlling and monitoring the probability of risk and preventing it in advance to an acceptable level. Risk management is crucial for all business regardless of their size, location and nature.
Five steps of risk management process -
The first step is to uncover, recognize and describe thr risk that might affect the project or its outcome. Example like project riak Register
Once risk is recognized next step is to determine the likelihood or consequences of the risk. You develop an understanding of risk and the affects of the risk which helps in migrating or reducing the impact of the risk.
Evaluating the probability of occurrence or resulting impact of the each risk and shortlisting which risk have the highest impact and prioritizing the risk ot deal with first. Evaluating the risk can be done by combing efforts of likelihood and impact or consequences. Asserting also involves understanding the various risk. The possibility of occurrence based on five scale framework
5. Almost certain
If the risk is small or acceptable it can be dealt with minor treatment eoth regular monitoring butnif the risk is big it should be migrated before continuing the project.
Once risk is evaluated next step is to control the risk. For instance, if a worker is working under a machine that will fall on him any minute here risk control implies moving a worker for there and fixing the machine before allowing the worker to work. Reducing the risk occurrence possibilities or. Impact of the consequences or both can be considered while facing a risk
This method is very effecting in tackling the risk and taking appropriate measures in eliminating and minimizing the risk.
5. Monitor and review
Monitoring and reviewing are the final step of risk management which involves understanding the impact of the control methods. If the risk is not 'risky ' or the impact of risk is minimized which implies the control methods as successful, if not then a better solution has to be developed.
The risk management process also helps to resolves problems when they occur because the plans have been already developed.
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