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Risk in businesses and the five key steps to manage it

Risk management is the process of identifying, accessing, and responding appropriately to control any threat to an organisation, business, and earnings. Usually, companies have an appointed risk manager who makes sure the company is as risk-free as possible.  

Companies follow a risk management framework because some of these risks can destroy a business, while others can cause severe damage. This damage can be both costly and time-consuming to repair, no matter what the project, task, or department. Accessing these risks and developing strategies to overcome them improves the chances of getting successful increase in business growth.  

Identifying the two types of risks 

Risks are usually or two types, internal and external. Internal ones are non-compliance, information breaching, dishonesty, and ineffective leadership, whereas external ones are exchange rates, political issues, reputational risk, and fraud.  

A successful risk management program benefits an organisation by identifying the risk, or a potential one, immediately and the proper response to it to minimise as much damage as possible. While the risk management department does cost an organization some money, it saves a lot more than it takes.  

Risk management process: 

  1. Identifying the risk 

Identifying risks involves a lot of brainstorming. The organisation holds a meeting with all their employees so that they can review various sources of risks and prioritise them according to the urgency of the matter.  

  1. Assessing the risk 

In most cases, the main difficulty arises in identifying the problem rather than finding an appropriate solution to it. Before starting to find the solution, it is better to start by finding out what caused this problem and where is the flaw in the system that has made it possible. Some questions you can ask are how can it influence the business, how much can it influence the business, how to respond to it, and how to prevent it from happening in the future? 

  1. Giving appropriate response to the risk 

Once it is known what the risk is and what needs to be done to prevent it or decrease its effects on the organisation, figure out if the risk recurs, and if the risk management department has an appropriate response.  

  1. Treating the risk  

The risks need to be eliminated and prevented from happening again. Set up a meeting to discuss this, which includes contacting all stakeholders. If you are a business owner, make sure there is a proper system or a channel where this process takes place so you can also keep an eye on all the solutions that are suggested and get updates on the progress, so you do not have to contact everyone involved separately to get updates.  

  1. Monitoring and reviewing risk 

Risks can never be fully eliminated, which means they are always present. The risk management department must make sure they keep a close eye on all risk factors. Monitoring and reviewing the risks and taking all the appropriate steps to decrease the threats should take place from within the system.  

Our recommendation is to stick with a strategy that includes maintenance and safety checks, staff training so that everyone can identify a risk in its initial stage, and most importantly, necessary insurance policies to mitigate the effects of risk on organisations. 

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