Risk Management

Risk Management is the process of identifying, analysing, controlling various kinds of risks that the business organisation is exposed to, be it social, technological, financial, political, legal or economic. Risk management is supposed to be a major part of a business organisation as it helps in protecting the organisation from unforeseen business scenarios. The business organisation is then supposed to act accordingly to minimise or assess the risk. Most of these risks have an impact on how the core of business functions and if the objectives are completed on time. So it’s important to assess all types of risks.

The most popular way of assessing risk management is Enterprise Risk Management (ERM). TheERM process is popular because of its access to the whole of the business organisation instead of different sectors. The ERM process involves both internal risk management and external risk management. The other main advantage of erm process is that it is considered as a positive risk management process that emphasises risk as positive and assess risk in a way that gives us information if the risk is going to be beneficial for the organisation. Risk as a business process that needs to be taken even though it causes uncertainty, it also helps in functioning of an organisation and makes it grow exponentially if done properly, that makes risk management activities of organisations crucial.

What Are The Processes Involved In Risk Management?

Risk management as explained above involves various processes and is a vast topic that is studied as a course and can be pursued as a career but that’s not the goal of this article so we won’t be needing any more information on that. The following process mentioned below is mainly followed when assessing and managing risk:

Identifying the risks

Identifying risks is the process of recognising if an issue is going to cause any harm to the functioning of an organisation.The risks are assessed from their level of risk factor towards the organisational instead of just recognising risks as a sole entity they are usually grouped under certain categories where they can be put to observation how they affect the objectives of an organisation. This grouping into categories is usually called identifying a risk and its presence in an organisation.

Analysing

Analysing the risks is the process of observing what effects the risks have on a business organisation. The analysing of the risk helps in determining if the risk will shake the business or the business can function normally if applied certain effective measures in the organisational procedure. This stage of the risk management process is crucial to the business.

Categorising the risks for further procedures

The risks are finally categorised, ranked in order of their damage to the firm. The proper ranking of risks helps in solving important problems first and then take passive steps in fixing the less important risks.

Treat the risk

There surely are more detailed and larger things going on behind the whole risk management process but for academic purposes the last to final step of the risk management process is treating the risk. Different paths and strategies are applied in solving the risk.

Reviewing the process and monitoring for further risks

The treatment of the risks then opens further procedures that are to be conducted for reviewing if the treatment actually worked or not. The risk management team may also further monitor the process and look for further risks and any other risks that arise from the whole fixing procedure.

What is Financial Risk Management?

Financial risk management is a type of risk management that is concerned with the finance(cash inflow and outflow) and finance only. This type of risk management is done and is a major part of the whole business process because of its nature. The business is usually concerned with alot of scenarios instead of only finance being the only sector or issue. But finance surely is the single incentive on which the whole business organisation runs with. So, finance risk management is a bigger subject but usually falls under the umbrella of Risk management. Financial risk management analyses if business has enough finance to pay off its debts if need arise. The whole system of finance risk management is build under this philosophy that if the business has enough finance to pay its shareholders if needed then the business is in good financial condition.

Conclusion

To conclude the article, risk management is a process of making the business safe and risk proof from all the existing risks and risks that are going to be an issue in near future. Proper processes have already been developed for acting like a guideline while managing the risk. There are frameworks currently in play that help in managing the risk management process. These frameworks are updated daily with new frameworks coming into the whole scenario. Financial risk management is a different term in itself but falls under risk management. It concerns the financial risk part of the business and looks after all the finance dangers that may affect the firm.