RISK MANAGEMENT

(in business) the forecasting and evaluation of financial risks together with the identification of procedures to avoid or minimize their impact.

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RISK MANAGEMENT

Risk management is the identification, evaluation, and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability or impact of unfortunate events or to maximize the realization of opportunities.

Five Steps of the Digital Risk Management Process

Posted by: Chris Duden | September 4, 2018

What is the risk management process?

The risk management process is a framework for the actions that need to be taken. There are five basic steps that are taken to manage risk; these steps are referred to as the risk management process. It begins with identifying risks, goes on to analyze risks, then the risk is prioritized, a solution is implemented, and finally the risk is monitored. In manual systems each step involves a lot of documentation and administration.

The Main Types of Business Risk

Strategic Risk. Everyone knows that a successful business needs a comprehensive, well-thought-out business plan
Compliance Risk. Are you complying with all the necessary laws and regulations that apply to your business?
Operational Risk
Financial Risk
Reputational Risk

Now let’s look at how these steps are carried out in a more digital environment.

Step 1: Identify the Risk

The first step is to identify the risks that the business is exposed to in its operating environment. There are many different types of risks – legal risks, environmental risks, market risks, regulatory risks, and much more. It is important to identify as many of these risk factors as possible. In a manual environment these risks are noted down manually.

If the organization has a risk management solution employed all this information is inserted directly into the system. The advantage of this approach is that these risks are now visible to every stakeholder in the organization with access to the system. Instead of this vital information being locked away in a report which has to be requested via email, anyone who wants to see which risks have been identified can access the information in the risk management system.

See Five Steps Towards a Better Risk Management Framework

Step 2: Analyze the risk

Once a risk has been identified it needs to be analyzed. The scope of the risk must be determined. It is also important to understand the link between the risk and different factors within the organization. To determine the severity and seriousness of the risk it is necessary to see how many business functions the risk affects. There are risks which can bring the whole business to a standstill if actualized, while there are risks which will only be minor inconveniences in analyzed. In a manual risk management environment this analysis must be done manually.

When a risk management solution is implemented one of the most important basic steps is to map risks to different documents, policies, procedures, and business processes. This means that the system will already have a mapped risk framework which will evaluate risks and let you know the far reaching effects of each risk.

Step 3: Evaluate or Rank the Risk

Risks need to be ranked and prioritized. Most risk management solutions have different categories of risks, depending on the severity of the risk. A risk that may cause some inconvenience is rated lowly, risks that can result in catastrophic loss are rated the highest. It is important to rank risks because it allows the organization to gain a holistic view of the risk exposure of the whole organization. The business may be vulnerable to several low level risks, but it may not require upper management intervention. On the other hand, just one of the highest rated risks is enough to require immediate intervention.

Go in more depth Bringing Quantitative Risk Analysis to Enterprise Risk Management

Step 4: Treat the Risk

Every risk needs to be eliminated or contained as much as possible. This is done by connecting with the experts of the field to which the risk belongs to. In a manual environment this entails contacting each and every stakeholder and then setting up meetings so everyone can talk and discuss the issues. The problem is that the discussion is broken into many different email threads, across different documents and spreadsheets, and many different phone calls.

In a risk management solution all the relevant stakeholders can be sent notifications from within the system. The discussion regarding the risk and its possible solution can take place from within the system. Upper management can also keep a close eye on the solutions being suggested and the progress being made from within the system. Instead of everyone contacting each other to get updates, everyone can get updates directly from within the risk management solution.

Check our recent post GRC Based Risk Mitigation Strategies

Step 5: Monitor and Review the risk

Not all risks can be eliminated – some risks are always present. Market risks and environmental risks are just two examples of risks that always need to be monitored. Under manual systems monitoring happens through diligent employees. These professionals must make sure that they keep a close watch on all risk factors. Under a digital environment the risk management system monitors the entire risk framework of the organization. If any factor or risk changes, it is immediately visible to everyone. Computers are also much better at continuously monitoring risks than people. Monitoring risks also allows your business to ensure continuity.

We can tell you How you can create a risk management plan to monitor and review the risk.

Here is What Our Solution Can Do For You

Have a look at how the risk mapping, predictions, live holistic view, dashboards, and much more will help your business manage risk better than ever before.

The basics of the risk management process stay the same

Even under a digital environment the basics of the risk management process stay the same. What changes is how efficiently these steps can be taken, and as it should be clear by now, there is simply no competition between a manual risk management system and a digital one. There are also many new risks which businesses are facing for the first time in 2019, and modern problems require modern solutions.

Implementation

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