Proper procedure should be followed for getting effective result from risk management: Risk management procedure starts from identifying potential risk and ends with controlling the risk.
Risk management procedure can be described as follows:
Risk management procedure can be described as follows:
1. Identifying potential risk
Risk identification is an essential step in management of risk. In this stage, the possible sources of risk is identified and named. While identifying the risk, it is obvious that the sources of risk are also examined in order to analyze the possible impact.
2. Assessing risk
Organization evaluates the risk after identifying the potential risk associated with concerned business. The basis of assessment is done in terms of probability. It is calculated from previous data and event. If the possible chances of risk is high and it will damage more, the primary attention is given. If the chances of occurring that event is low gives minor attention. The possible risk is to be ranked as per their severity in terms of business loss.
3. Selection of appropriate technique
Various tools and techniques are available for managing the risks. In third stage of risk management, management select the appropriate technique as on their requirement. Management consider the following important factors while selecting the technique:
* Cost and benefit
* Appropriateness
* Health and safety
* Future impact
4. Implementing and controlling risk
After assessment of risk, management implements the appropriates action and use suitable technique and model. There are four techniques that can be implemented; avoiding the risk(changing the plan), transferring the risk(to someone more responsible to handle it effectively), mitigating the risk(doing something to minimize the impact), or accepting the risk(applicable if the risk is negligible).
