Managing risk for an enterprise has become an important business driver and an act of survival. Business groups are aware of its importance and are increasingly focusing on how to reduce risk as far as possible. Enterprise risk management has become integral part of the business strategy with enterprises taking seriously to managing risk.
Risk, if not managed properly, may pose numerous challenges and also create uncertainty in the organisation. A comprehensive enterprise wide risk management exercise covering all possible risks and their possible impact helps an organisation to reduce its exposure to various risks and to increase the sustainability of the business in addition to building competitive advantage.
Identifying And Classifying Risk
Risk Management is the process of identifying vulnerabilities and threats to information assets, processes and activities at an organisation and to decide on the countermeasures in order to reduce the risk to an acceptable level.
Organisations need to identify risks embedded into their processes, information assets and various other sources including human element. Post that, classification of each risk is equally important exercise which helps in completing the risk assessment as well as prioritising the risks the organisation need to address.
Risk Assessment And Treatment
This step will help the organisation in calculating the risk with its possible impact on the organisation, its branding and revenue.
Risk treatment will involve implementation of controls to reduce the risk to lowest possible level or at an acceptable level. Residual risk should also be as low as possible.
Risks should be mitigated as much as possible by implementing required controls. In some cases it may be transferred to a third party. Some organisations may decide to live with certain set of risks as the impact due to those risks may not be significant for them. However, the strategy should be to mitigate or transfer the risk.
Benefits Of Risk Management
Organisations that have developed a comprehensive risk management programme have relished the benefits. Better compliance, assurance, better reporting and visibility into the organisation, better decision making, help in defining business strategy and competitive advantage are some of the benefits organisations can reap if they manage risk effectively.
Updated Date: Feb 02, 2017 23:32:44 IST