Introduction
They ways companies and organizations operating today reflect the uncertainty of the past years economic time. With the help of projections and forecasts, the companies used to work efficiently, but now they avoid making the business judgments and focus on managing the risk. In any industry or organization, the main reason for the uncertainty is the risk. Thus, now companies are focusing more on the identification of the risk and to manage them before their effect on the business. This ability in handling the risk helps the companies to act on the future decisions of the business confidently.
Risk can occur from internal or/and external sources. Management cannot directly control the external risk. External risk consists of exchange rates, political issues, interest rates and many others while the internal risk consists of information breaches and non-compliance among many others. Future objectives cannot be defined possibly without the risk management which is the reason why it is important.
Vital part and an essential element of a successful business are decision-making. Strategic decisions can be critical to the success of a business like decreasing or increasing a company’s size. The impact of decisions is high which are made in the smaller company, regarding staff particularly, than those which are made in the large company. Some decisions are made quickly in business. No matter if the decision is small, every decision is important for the organization.
II. Risk Assessment
A systematic process in which potential risks are evaluated that can be involved in an undertaking or projected activity is the risk assessment. Risk assessment describes the whole method or process in which risk factors and hazards are identified that can cause harm and also evaluate and analyze the risks that are associated with the hazard. Risk assessment also determines the suitable ways to remove the hazard or risk control in a case when hazard cannot be eliminated.
Risk assessment is an in-depth look at the workplace to find out things, processes, situation, and so on which causes harm mainly to people. After the risk identification, it is evaluated and analyzed that how severe and likely is the risk. After the determination, the measures are made to effectually control or remove the harm before it happens.
Risk Management Plan
Risk management plan is a process which consists of risk assessment and a strategy for the risk. The impact of risk events is removed or minimized by designing a risk management plan.
Identify risk
Risk identification is both a disciplined and a creative process where the brainstorming sessions are held, and the team creates a list of possible things that could go wrong. The potential risks are evaluated in risk identification that can happen. On the base of the experience, checklists of risks are developed by some industries and organizations which can be helpful to the manager and the team to identify the specific risks and expand the thinking capability of the team
Common business risks
It is normal to take risks in business to achieve objectives of a business and to reduce non-essential risks. Some common business risks are:
Property
One common business risk is the property risk. This refers to the risk events that impact specifically on the facilities and physical infrastructure of an organization. The risk events that come into the category of property risks are adversative weather conditions, fires, and terrorist attacks. In addition to destroying and damaging a physical property, the events of property risk can potentially create stoppages in the material financial losses and business operations.
Liability
The possibility of the liability increases the risk to the company due to the damages that result from the ownership, purchase and using services or goods offered by the company. To identify and mitigate the liability risk the product is designed and tested carefully. But it can be inherent to some extent in nature of the product like in the pharmaceutical supplies and automobiles.
Competition
Competitive risk includes the potential actions of the competitor that impact other’s business negatively. But when the competitive market is healthy then it drives the improvements like quality improvements and cost reductions. Some examples of competitive risk are pricing, promotion, innovation, resources, location, etc.
Determine company's vulnerability
The vulnerability is the gaps or weakness in a security program or in the protection efforts, which are exploited by the threats to get unauthorized access to the asset. After the identification of the plausible threats, it is must to perform the vulnerability assessment.
Probability
The probability of vulnerability starts from ‘very high.’ In this high profile facility, the defense level or deterrence by countermeasures is insufficient. Then comes regional profile of ‘high’ facility in which the defense level or deterrence by countermeasures is not enough. The ‘moderate’ profile is unknown in the local region, and the defense level or deterrence by countermeasures is slightly adequate. In ‘low’ profile facility and the defense level or deterrence by countermeasures is adequate.
Prepare contingency plans
Preparing a contingency plan is the course of action that is designed to help in effectively responding the organization to an important situation or future event that can or cannot happen.
Monitor and adapt as needed
Methods of adaption assessments are compatible with the standards of international risk management i.e. ISO: 31000. At the local and national level, the approaches for risk management are recommended for the adaption assessment increasingly. Monitoring and evaluation play a crucial role in improving the practice of adaption process through experience and evidence. It will help in avoiding the costly maladaptation, and future practices will improve.
Impact on small business decisions
For the growth and survival of a small business, the owner should recognize the need of risk management and understand the processes and principles of it to make the necessary decisions. Owners of small business usually run the business without a risk management plan and rely on their personal experience and instinct to manage the risks. An effective plan for the risk management will help the owners of small business, total freedom with the guarantee from all the business risks. It will identify the significant risks and will create suitable response mechanism.
V. Failures of not assessing risks
A failure is a significant event in risk assessment that a sponsor will never want in business to happen. These failures include a schedule overrun, budget overrun, quality failure in meeting scope, or objectives of mission performance.
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