Whatever we do, risk is involved in it. Risk management is important aspect that shouldn’t be neglected by any businessmen. There are many risk factors that can affect productivity and efficiency of businesses but by the adoption of proper risk management tools and techniques, risks can be identified, minimized or eradicated. The points about risk management given below.
Following points can help businesses in managing and controlling risks in possible way:
- Firstly, organization must need to identify the important assets that can be affected from risk. The process of formulating risk management techniques would get easier after identification and categorization of company’s essential asset.
- Businesses can face both types of risk i.e. physical and financial risks. Some risks can be fore-casted earlier but some risk occurs spontaneously. Taking corrective actions against forecasted risk will avoid businesses from any major loss but unfortunately, risk management of intuitive risks is a difficult job. Businesses must be keen, observant and sharp enough in handling of those intuitive risks.
- Thirdly, better way of doing risk management is by quantifying possible key risks factors according to their magnitude. The discussion and ranking of risk factors in management meetings will help to control risk, effectively. Although, it is a costly and time taking process but pro-active approach is always better than re-active approach in order to identify and minimize risk.
- Organizations must not sit idle after quantifying their risk factors chart. Risk factors affecting your businesses keep on changing with time due to many known and unknown market trends. Therefore, for better risk management approach, businesses must not forget to review their quantified risk factor chart on timely basis.
- Businesses should invest money in resources that are necessary for taking possible corrective actions against obvious and intuitive risks. This action seems to be costly and the truth is, it is, but through many business failures it has been proved that investment in resources for risk management is cheap as compare to the losses that occur due to lack of adoption of effective risk management techniques.
- Top executives and higher authorities must create a risk management culture in their organization. Educating themselves with effective risk management techniques may benefit them in long run. Keeping themselves up-to-date with the credit and operational risks will help them to come up with better possible solutions.
- Risk factors are mostly interlinked i.e. money risk can cause changes in market price risk and operational risk may affect the positioning of organization in the business community, etc. Therefore continuous process of re-assessing the risk is the advanced and effective component of risk management process.
- Mostly, business failure occurs due to wrong risk management techniques formulation and adoption. Types of risk and possible solution for risk control vary depending upon the type of business therefore risk management must be done very carefully and accordingly. For example, financial risk, business risk to people and property, business risk to finance and strategy etc. vary from business to business and therefore demands different possible solutions.
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