Risk management constitutes identification of potential financial and safety risks affecting a business venture in advance, analyzing them and taking adequate safeguards to eliminate them or to reduce their effects.
It involves collection and analysis of information on all internal and external factors having possible repercussions on a business at project preparation stage, well before the investment decision.
The study of risk management practices involves different disciplines and the information is shared globally in order to arrive at common solutions to mitigate various types of business risks.
The financial risks involve uncertainties like volatility in capital markets, recession, project failures, runaway inflation, legal liabilities, accidents, natural disasters etc.
Risk management involves maximizing resource allocation on more profitable activities and minimizing on risky ventures.
Intangible risk management involves imminent risks that are ignored by an organization due to lack of identification ability; such as knowledge risk resulting from deficiency in know-how and management, relationship risk resulting from ineffective collaboration etc.
The main elements of risk management comprise identification of the threats to business, assessment of the vulnerability of critical assets and the consequences, and adopting a strategy of prioritized counter-measures.
Some counter-measures include taking into account the risks in advance and allocating funds accordingly (risk retention), channelling into different activities/investments (diversification), avoiding high-risk businesses and locations altogether (risk avoidance) or insuring the risks (risk transfer).
Safety risks involve the probability of harm to property or life as a result of hazardous elements like electricity, fire, chemicals or unsafe work conditions; which should be identified and eliminated through simple precautionary measures.
Finally, take care to review your risk assessment periodically and update it whenever new information or insight is gathered.
Article Written by Dolphi D'Silva [287 Words]
Posted on Oct 7, 2013 with Views.
Risk Management Information
Risk Management News
Tags: risk management, risk management article, risk management saviodsilva, dolphi dsilva.