Recognize and assess risks at all levels of your organization and evaluate them based on likelihood and impact. Determine how best to respond by either avoiding, reducing, sharing or accepting them.
Communicate openly about risk trends with all stakeholders. Managers and the board should receive updates in all four categories; however, priority should be given to “Improve” and “Monitor,” while less attention and energy is devoted to “Reduce” and “Examining.”
1. Risk Assessment
Risk analysis is the process of identifying hazards and potential risks within an organization, then taking measures to mitigate those risks. It involves estimating both injury likelihood and severity before taking steps to mitigate those risks – something many workplaces require as a legal requirement to ensure employees remain safe while at work.
Risk assessments should be carried out collaboratively by teams consisting of supervisors and workers familiar with the processes being assessed. Furthermore, experts from other departments such as IT or finance should be included so as to foster communication between both groups involved and improve information security.
There are various approaches that can be employed when it comes to assessing risk, including fault tree analysis and qualitative and semi-quantitative risk matrices. These matrices measure probability and impact across various scenarios – making them especially helpful in assessing business risks. When conducting risk analyses, both potential events as well as hypothetical ones must be taken into consideration since even unlikely risks can have major ramifications.
2. Risk Monitoring
As soon as risks have been identified, assessed, and mitigated appropriately, it’s vitally important that they are monitored. Doing so ensures that no new risks arise while providing insight into whether or not your strategy has worked effectively.
Stakeholders should determine how much monitoring is necessary for each risk. Some risks may be more crucial than others and require different forms of oversight; for instance, businesses might need to pay extra attention when monitoring risks that could damage their reputation or pose significant financial burdens.
These results should be presented regularly to decision-makers for review, and depending on their findings they may adjust their strategies or allocate resources differently – for instance by adding more security measures against certain risks, increasing budget for monitoring an existing one, or identifying gaps or areas needing improvement. This step also encompasses assessing control effectiveness while identifying any necessary improvements.
3. Risk Response
Risk management traditionally has been used to monitor threats to project objectives. However, many of the same tools that were initially employed to mitigate threats can also be applied towards managing opportunities.
To effectively address risks, an appropriate response must be devised. There are four general strategies to choose from for dealing with them – avoid, transfer, mitigate and accept. Avoiding risks removes them from a project altogether and may be best used against risks that could land an enterprise into legal trouble or lead to injuries to others.
Transferring risks means shifting responsibility for them onto someone else, typically through purchasing insurance or providing warranties and guarantees. Enhance opportunities by increasing their probability and impact.
All risk responses must be documented and included in the project management plan along with costs, schedules and resources associated with them. Risk owners should review these responses regularly for effectiveness; teams can use a robust list view or Kanban board visual workflow system to keep an eye on these activities and plan and execute them within their schedules.
4. Reporting
Reporting is the process of collecting and disseminating information in an easily understood format to specific target audiences and stakeholders. Making information readily accessible allows informed decision making while simultaneously supporting key business functions.
An effective enterprise risk management (ERM) process in any organization requires coordination among departments. A sign that this initiative has reached maturity would be the presence of a chief risk officer (CRO) or dedicator manager who manages and coordinates ERM activities.
Culture, governance structure, and values all play an integral part in determining the success of an ERM program. A corporate culture that prioritizes risk-awareness can help establish an ERM program with robust resilience that supports sustainable growth – increasing talent retention rates while improving company profitability. Furthermore, having an ERM framework designed with strong governance in place ensures effective implementation and organizational buy-in so the organization is able to achieve strategic goals while mitigating risks effectively.
