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Process of Risk Management

Every organization has to take the risk for the growth and productivity for the organization. Though risk is not so easy but to get a change and trying new things need a lot of courage and strategic planning’s. Such planning is called the Process of Risk Management

Risk Management is forecasting and minimising the impact of negative-threats and failures.

Steps in the Process of Risk Management

  1. Identify the Risk
  2. Analyse the Risk
  3. Risk Priority
  4. Find the Solution
  5. Review Risk

Identify the Risk

Identifying the risk means understanding the type of risk. Finding out the type of risk and them working on them is the first step of risk management process. Risk can be of different type like environmental risk, market risk, legal risk etc.

It is very important to find out the type of risk the organization is facing. If their ae risk management system already working then risk become a lot simpler and less severe.

Analyse the Risk

After Identifying the risk, it is necessary to work on it. To understand the nature of the risk and try to analyse the solutions. Analyse the risk through documents, policies, procedures etc. Risk analysis is san important tool to prepare, manage and analyse. It helps us to analyse and identify the type of risk.

Risk analyse helps company to understand the difference if any resources are affecting the business that is creating the risk and hence the company can work on it according to the severity caused.

Risk priority

It is very important to give ranking to the risk. How much is the severity of the risk that need to be identify. So, that the organization can understand how much efforts and what resources they have to use to fight against the risk.

Risk which are at low grade or creating less impact on the business can be considered as normal because there will be minor risk in the organization every time. But if the risk is severe and can impact or have effect in the growth or financial loss of the organization then we have to work on them.

Find the Solution

Once the risk has been understood it the time to find the solution. Risk is equally important but after taking risk the outcome can be positive or negative. So, we should be prepared for the them.

Usually, the brain storming sessions are carried out to find the best solution for the risk. Organization should make a document creating all the solution project they have faced or are already aware of the type of risk that may occur and the respective solution so that in future the organization.

Review Risk

As per the severity of risk, the organization should review them. Some risk will be always present and cannot be eliminated completely. Monitoring Risk will ensure that there is no severe problem in the organization and work will be hinder and the growth and productivity continues.

Teams are assigned as a Risk management whose main work delegation is to watch for the risk or problems in the organizations and make the departments aware of the respective risk and bring out the right solutions for the same.

Need for the Risk Management Process

If you don’t invest in risk management, It doesn’t matter in which business you are in, It’s a risky business

– Gary Cohn

Risk management is very important for the organization because it empower business and the resources. So, to keep the work stable and productive we have to manage the risk process. The process of Risk management is usually required for below:

  1. Improve Process
  2. Optimise Resources
  3. Improve Project cost
  4. To be Ready for sudden loss
  5. Help to cope up with Financial Loss

Improve Process

The team working on the risk management tis continuously monitoring the process. Their keen interest is to find out whether there is risk in the process, and then they analyse whether the risk cause is minor that cannot be eliminated or severe risk. So, this continuous monitoring and not letting process hinder lead to stable and improved process. Hence there is improve in the process system and accordingly productivity increases.

Optimise Resources

Identifying risk and working on them at correct time increases the resources like time, cost and people. Sometimes the risk is so severe that it cannot be considered under control and hence the organization have to face with many losses in solving the risk. Well prepared risk management help to identify the severity of risk before hand so that the organization can work on them and solve it. So, Risk management is very important to improve the resources.

Improve Project Cost

In order to remove severe risk in the project is very difficult and cost effective. So, it is very important to work for the solution of the project. When the work is done smoothy without any losses it will benefit the organization with profits.

To be ready for sudden Loss

The main motto of the Risk management is that it can help us identify the type of risk due to the monitoring team, hence it can help us to understand the severity of the risk and accordingly help us to find out eh solutions. It helps us to be ready instead of some sudden financial losses from sudden severe risk.

Help to cope up with financial loss

Risk management help us to be ready and work on it. The type of risk and the severity of the risk help us to decide hoe much loss does it can cost. SO, that if tit is under control, we should try to control it and if not then we should try to be prepared financial without any more losses.

Risk Management Strategies

There is different way of handling the risk in different departments. Thought he layout of the strategies will be the same.  Let’s see he most common Risk management strategies

  1. Diversification
  2. Insurance
  3. Operating skills
  4. Clearing the debts


These strategies are related with the investments. These strategies help us to reduce the risk by investing in many areas and assets. The reason is that if we have number of investments in different areas when we are in the great loss all this investment will help us out to find the solution against the risk and help the organization to balance and manage the financial loss.


There are many insurance policies available in the market. For example, key person insurance, Liability insurance, property issuance etc. This insurance proves to be beneficial to fight against the risk. Though there are some costs to maintain the insurance and it may feel like a loss but the lost created by the sudden risk is far more than the cost to maintain the insurance. So, the risk management team will always look forward to insure the organization in various related areas.

Operating skills

Hiring a set of risk management team can help us monitor the risk. Risk team should help in reducing the risk of the business by continuous monitoring, identifying and analysis the type of risk. They should continuously audit the department sat their end and they should create official documents and help the department in helping them to reduce the risk.

Clearing the Debt

This is the most sever risk in the organization that one can face. “Debt”, One should never have access debts, Debts should be always clear at the regular time interval. Because id the debts are not clear it can lead the organization towards bankruptcy if there is nay type of loss in the organization which cannot be handled. Because if you are already in debt, you will always more finance to fight against the risk.

Types of Risk

There are various types of Risk organization may face.

  1. Market Risk
  2. Inflation Risk
  3. Foreign Investment Risk
  4. Business Risk
  5. Credit Risk

Market risk

Evaluation of market risk is very important in the organization. Market risk is related with the sudden change in external or macro factors which impacts organisation performance. It is the overall financial risk that each and every individual has to face. Market risk is itself divided into subcategories like equity risk-stocks or shares decreases, interest risk-interest rates decrease, currency risk -foreign exchange rates decrease.

Inflation Risk

Risk linked with change in inflation rate is called Inflation Risk. It is the real time loss in the value of the assets, investments, income etc. Inflation risk hits globally all across the world that can learn to global loss financially. This risk is the far most dangerous risk in the work and it can be very difficult to cope up with the loss generated by this risk.

Foreign Investment Risk

When the organization is working in joint venture with the foreign countries they are dealing in the foreign currency or investments. So if the foreign exchange rate decreases or the shares decrease it will directly affect the joint venture and there will be the overall loss in the organization.

Business Risk

When the competition is going on too much tough in the market than the business can hinder. Business can be at risk if we are not competitive and giving our best for the growth. If others gain their business, then we are in great loss and we cannot deal with the loss and Afterall we have to close our business. SO, we should be firm in the competition and give our best.

Credit Risk

Credit risk is related with the debts. If we are not paying debts at regular interval, we can be in trouble. Many companies have taken the loan or credits from the government through banks and if the company is notable to finished the EMI at the given time, then it can lead to a great loss in the company and maybe it can be bankrupt.

Disadvantages of Risk Management

  1. Long term Investments
  2. Time consuming
  3. Cost
  4. Lack consistency

Long Term Investments

In order to monitor Risk management, we need to hire special resources for the same. We have to hire new people for the team and the other useful resources they require. Though severe risk occurs unpredictably and it may not occur years together but to manage the resources cost too much. So, it is like a long investment on the resources.

Time Consuming

As Discussed, severe risk is unpredictable and may not occur year together. But we are hiring resources to look after it or other risk in the organization which can lead to the time consumption in the organization.


To maintain the resources looking after the risk management can cost too much money. Sometime we also have to solve the minor risk that may not create any problem and are already present in the organization. So, to manage the risk management can bear too much cost to the organization.

Lack consistency

It can often create lack of consistency in the employees and they are often confused as they won’t be able to understand the severity of the risk. They may think that their organization is not doing well and it is going on the lower graph and hence they would try to take up new jobs and switch the company.


Never underestimate your risks

Risk management is very important now a days in the organization. Though it has some advantages and some disadvantages but it is very important to have the risk management team monitoring the Risk , analysing it and finding the right solution to filter it. Risk management help us to learn how much feasible is our project and how much we can rely on the project for the future growth.

Recommended Books for the Process of Risk Management

Article Credit

This article is contributed by Ms. Pragya Delhiwala. Experienced as a quality engineer after completing her education: 2nd rank BE in Electronics & Communications; 1st rank MBA in TQM. She is passionate about management, writing and painting.

More articles from Ms. Pragya Delhiwala:

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