Rookie Guide for Risk Management — Risk Management Process | The IRM India

Risk management is the process of reducing or mitigating risk. It begins with the identification and assessment of risks, followed by the use of the best resources to analyze and reduce them.

Risk generally arises from uncertainty. In an organization, this risk can arise due to market uncertainties (supply, demand, stock market), project failures, accidents, natural disasters, etc. Depending on the type of risk, there are different tools to deal with the same thing.

Following this cycle, there are four stages in the risk management process. The first step is risk identification, followed by assessment and management.

Risk Management Process

There are several organizations that provide principles and guidelines for risk management processes. The steps involved remain essentially the same. There are small differences that go into the cycle of different types of risks.

Project management risks, for example, are different from financial risks. This explains some developments in the whole risk management process. However, ISO has specified specific steps for the process and is almost universally applicable to almost all types of exposure. Policies can be implemented throughout the life of any organization and across a wide range of activities, including strategies and decisions, operations, processes, tasks, projects, products, services and resources.

According to ISO 31000 (Risk Management — ​​​​​​Principles and Guidelines for Implementation), the risk management process includes the following steps:

Establishing the Context :

Establishing a context means identifying all potential risks and thoroughly analyzing potential impacts. Different strategies are discussed and decisions are made for risk identification process.

Identification:

Once the context has been successfully established, the next step is to identify potential threats or risks. This identification can be done at the source level or at the problem itself. Source analysis consists of analyzing the source of a risk and taking the appropriate mitigating measures. This source of risk can be inside or outside the system.

Assessment:

Once risks are identified, they are evaluated based on their likelihood of occurrence and impact. This process can be as simple as assessing tangible risks and as difficult as assessing intangible risks. This rating is more or less a guessing game and determines the academic best estimate of the plan’s success.

The industry practice or formula for arriving upon the risk is: Frequency of occurring × Impact