5-step Guide to a Successful Risk Management Process
Are you someone who would buy a poster that says, “Risk Happens”? If you’ve answered yes and you believe that life is in no way certain, then you’re definitely a project manager. Risk is a part and parcel of any business venture. In any business scenario, the risk management process encompasses steps such as evaluating, […]
Are you someone who would buy a poster that says, “Risk Happens”? If you’ve answered yes and you believe that life is in no way certain, then you’re definitely a project manager. Risk is a part and parcel of any business venture. In any business scenario, the risk management process encompasses steps such as evaluating, identifying, and prioritizing issues on the basis of their economic impact.
While executing a project, you will definitely face a number of risks and issues. But how do you manage something that’s as elusive as project risk management in today’s dynamic market space? The answer is simple, you must establish an effective risk management process. Setting up processes can make the unmanageable manageable, and if you want to take what looks like a disadvantage and turn it to an advantage, follow our five-step guide to establishing a good risk management process.
Five steps to establishing a risk management process
Analyze the situation
Recognizing circumstances where risks arise is a critical aspect of every risk management process. Understanding the relationship between your business and the environment in which the risk exists will help you judge the boundary to which the risk exists.
Identify the risks
Risk identification is another key step in every risk management process. It involves the identification and analysis of specific risks associated with certain hazards. However, risk identification doesn’t imply a situation where you or the management will have to factor in distant possibilities. Every form of risk can be categorized into the following: ethical, financial, legal, and physical. All of these can play a critical role in influencing your business outcomes and brand reputation.
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Evaluate or assess risks
This step involves building an understanding of the risks that have been identified and subsequently determining how dangerous that particular risk is and its likelihood. This risk management process takes into account two factors, such as likelihood and severity, and involves the process of evaluating the probability of occurrence and the subsequent impact of each risk factor. The priority can be estimated by combining the effect of probability and consequences.
Regulate or control risks
Once all the steps given above have been completed, the next step in risk management would be to control these risks. For instance, in a workshop, if an employee is working under a machine that may fall at any moment on top of him, the process of risk control or regulation would first involve moving the worker to a safer location and then fixing the machine so that it doesn’t harm anyone. The steps involved in risk regulation or control are as follows: eliminating hazards, substituting hazards, isolating hazards, and restricting control.
Monitor and evaluate risks
Risk monitoring and evaluation is the final step in every risk management process. It involves developing an understanding of the impact of the control mechanisms that were developed for the hazard and the risk it poses. If the hazard or issue doesn’t pose the same challenge which was intended to be controlled, then the risk management strategy will be evaluated as successful. This step is critical for ensuring that no mistakes were made and the risk doesn’t spiral out of control.