Risk Management – continuous and evolving process
Risk Management - Risk is an essential component of a business, and risk management is part of the large-scale work that company management does to create value. Risk management is the process of identifying, evaluating, monitoring, and controlling that impacts on the achievement of the institution's objectives and involves the necessary measures to reduce risk. Risk management is a unified, continuous and evolving process in which each employee within the institution participates. Risk management is one of the important components of the strategic management of the institution. The main task of its management is to identify risks and take appropriate action. Risk management can identify potential positive or negative factors affecting the institution's performance. Risk management encompasses virtually all risks associated with the institution's past, present and future activities. Management ensures the establishment and operation of a sound risk management system in the facility, while the internal audit subject set up in the facility is responsible for evaluating the existing risk management system and issuing recommendations to improve it. Risk management should be permanent and implemented in accordance with the risk management strategy approved annually by the head of the institution. The risk management process is a set of coordinated and consistent continuous actions.
The individual components of the system depend on the specifics, objectives, and strategy of the institution, but the overall structure of the risk management process is identical across institutions:
1. Identifying Potential and Possible Risks This stage involves conducting statistical and analytical studies, studying the market, researching competitors and also analyzing your own production, identifying problems.
2. Selection of the identified risk management method Once the risks have been identified, the optimal method for their management is selected.
3. Developing a Risk Strategy Developing a risk strategy is an important and difficult task, as the company needs to take into account all possible outcomes and determine appropriate actions.
4. Risk Strategy Implementation Here's the simple thing - the company must act on the risk strategy developed.
5. Summary of Results Whenever a risk strategy is already developed, the company performs statistical analysis and makes changes if necessary.
Common Risk Management Methods:
Insurance of property and business risk insurance - (if the insurance contract does not provide for other things) the insurance amount not to exceed the actual value (the insurance value of a property's true value, the insurance contract award today, and its seat) and the business risk - the loss of entrepreneurial activity may occur.
Risk Denial - When a company is in crisis it tries to avoid additional risks. For example: entering new, unexplored markets, releasing new profiles and rebranding.
Risk Prevention - Step by step risk reduction and raising funds for the company "Black Day".
Outsourcing risk - thanks to the company reduces costs and transfers responsibility for some of the other companies.
Increase reserves - Increase anti-crisis fund.
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