Risk management is simply the process of identifying, making an assessment, and controlling any kind of threats to an organization or a company’s earnings and capital. Risks can emanate from different types of sources. They include technical issues, legal issues, financial uncertainties, natural disasters, and strategic management among other things. A risk management program will always be there to help an organization be aware of all the risks that it can face. Risk management is also very important because it is responsible for assessing the relationship between various types of risks and their impacts on an organization. Organizations should manage risks for the sake of knowing the risks that are worth taking as an organization. According to Marika Tolz, risk management should always be intertwined with organizational strategies.
The reasons why risk management is very important
No organization, company, or business is safe from risks. Every organization or business faces the risks of events that are unexpected or uncertain. Those risks can cost you and your organization a lot of money if at all you do not have an idea of how to manage them. That is the reason why Marika Tolz speaks of the importance of risk management in organizations.
Risk management in many organizations has never been as important as it is right now. This is because the risks that modern organizations face have grown and they have become more complex. The complexity of risks has been fueled by globalization. Organizations do not only have to deal with one or two risks anymore. New risks are always emerging and most of them are always related to the use of modern digital technology. Climate change has also been identified as a threat to organizations. Having a risk management strategy is a very important step for any organization to be aware of possible threats and plan accordingly.
Things that you should always remember when you are incorporating risk management into your business strategy
- Building a smart plan
The number one important thing to always remember when you are incorporating your risk management plan into your business plan is building a smart plan. When you are building the plan, you should be thinking about the future. Even if you already have a plan that is working for you, you will need to think about potential setbacks or hazards in the future. It is very important to think of different scenarios and try to find out how you can respond. You should consider the financial, personal, and resources that are needed to keep the business in line.
- Identify the risks
It is also very important to try and identify all possible risks. When it comes to risk management, you should never think that you can eliminate all possible risks. This is because there are a huge number of them and more will keep on popping. That is why technology is now being used to identify all possible risks.