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Risk Management Process

Before an organisation takes up any project or task, they must analyse the risks associated with that project. One method that can be helpful in identifying, analysing and monitoring risks is the Risk Management Process. Through this process, project managers and team leaders get a basic idea regarding the projects at hand. 

According to Statista, the amount spent on Risk Management globally in 2022 was around £5.14 billion. Hence, it becomes crucial to understand the importance of properly implementing this process. So, what are you waiting for? Read this blog to learn about the Risk Management Process, which includes identifying the problem, investigating it, and coming up with a fix to stop it from happening again. 

Table of Contents 

1) What is the Risk Management Process? 

2) What are the steps of the Risk Management Process? 

      a) Identifying risks  

      b) Analysing risks    

      c) Prioritising risks 

      d) Treating identified risks  

      e) Monitoring risks 

3) Benefits of Risk Management Process 

4) Conclusion 

What is the Risk Management Process?

The Risk Management Process is the method of identifying, analysing and monitoring risks to protect organisations from getting affected severely. Risks are different for every organisation. Risks are also different for different projects that are undertaken by different teams in an organisation. 

Moreover, the method of solving various types of risks is also different. This is why, to properly mitigate risks the Risk Management Process was  formulated, which often acts as a guideline for organisations. Often, a separate team of individuals with different calibre and responsibilities are put together to mitigate the severity of the risks.
 

Risk Management Green Belt 
 

What are the steps of the Risk Management Process? 

Understanding what is Risk Management Process helps managers and their teams to perform better by taking care of the many risks that come with the projects. This process involves following a framework which determines the actions that are required to be taken to resolve any errors and risks. This framework is as follows:
 

Steps of the Risk Management Process 

Identifying risks 

The first phase in the Risk Management Process is to identify all potential risks which the organisation may have to encounter. 

There are different types of risks namely  market risks, environmental risks, and more.

They can be grouped into four major categories of risks: Hazard risks, e.g., accidents, fire, floods, etc., strategic risks, etc  And there are cases of viral negative feedback, financial risks, e.g., an economic recession, and finally, operational risks, e.g., supplier failure and employee turnover.

You try to identify as many risks as possible and fine-tune your risk management strategy by categorising them based on the above four types. Some of the best ways to identify risks are listed below Consulting with industry experts

Measurement is a tool that helps in assessing all possible risks that the organisation is exposed to by seeking experience from its members and taking the risk to give input. Doing a group brainstorming session when all the possible risks have been established, and a list compiled, then each of the risks will need to be recorded in a project risk log or project risk register to aid in the monitoring of risks throughout a project.

It continuously functions like a log of every risk for all projects. It, therefore, assists not only in the control of current risks but also acts as historical reference material for the past projects; that makes it a very valuable Project Management tool. Manually, this is done in an offline environment, but if you hold a risk management solution like Pulpstream, you can input this directly into the system.

Then, all the project Stakeholders will be able to see the data for risks, which would allow everyone easy managing of threats for the whole team. Bear in mind that the risk landscape changes, so you may need to keep coming back to this risk identification step.

Interested to learn more about Risk Management? Sign up for our Risk Management Black Belt Course now!

Analysing Risks 

The risks that are recognised should be analysed meticulously. This helps the organisation, employees, and stakeholders understand the importance of these risks and mitigate them properly. By analysing the risks, the organisation will be able to understand the severity of the risk and how it can impact business operations. There are several ways you can analyse risks. However, these two are the major ways that you can assess Risks. These are as follows: 

a) Qualitative assessment: In this type of assessment, the risks are measured against occurrence probability and impact severity. But how can you measure these two factors? Well, the probability of occurrence is measured strictly based on the experience of the Risk Manager and also by evaluating the progress of the project.  

On the other hand, the impact severity is measured on the basis of the severity created by the impacts on the project. A scale is used to measure these impacts and classify them according to their severity. To help the team understand the importance of mitigating the risks according to their severity, the following equation is used: 

Criticality = Occurrence probability (P)* Impact Severity (I) 

b) Quantitative assessment: This assessment is generally carried out to evaluate financial risks. These risks occur when there are unforeseen circumstances where the project might have a chance to go over budget, or any additional cost that can be incurred because of some unfortunate circumstances. Sometimes, this is also measured to gain an approximate idea of the profit that can be generated in the light of a new opportunity. 

Prioritising risks 

This is the one of the most important steps in the Risk Management Process. After identifying the Risks that are associated with the project, it is imperative that you prioritise these risks. It can happen that there are more than two risks that may come with the project. Your team must decide which risks should be addressed first, and necessary steps are required to be taken.  

The risks that come along with the project should be studied meticulously. Only then it's possible to justify why you are prioritising one risk over the other. However, risks which are prioritised towards the bottom of the list should also be handled with equal care. Time management is extremely important in this aspect. Allocating enough time and care to each and every individual risk helps in mitigating them effectively without those getting overlooked.  

Treating identified Risks  

After identification and analysis of the risks, the next is to either prevent or eliminate the impact if there are any negative risks, and if there are any positive risks, then the target is to increase the probability of increasing the good impact of the Risks. To manage these risks, some strategies should be decided by the organisation. There are some seven strategies that you should adopt when you are treating those risks. These seven strategies are described as follows:
 

Seven strategies for treating Risks 

a) Accept: You can use this strategy to monitor the risks without interfering with them.

b) Mitigate: If you happen to come across that the risks are impacting negatively on your business process or the projects that are being undertaken, you have to mitigate first hand.

c) Enhance: If you see that there is a risk that positively affects the impact on the business process or project, you should try to enhance this opportunity.

d) Transfer: You can transfer those risks to a third party if you find that they are better handled or managed by a third party if you find that the risks of their negative consequences are better managed or handled.

e) Share: Similarly, if one found that risks at the workplace are turning out to have a positive impact on the business operation with the help of any third person, then one can share the same positive outcome with them.

f) Avoid: Your responsibility is aroused if the Risks give rise to any doubt in operations related to business to get rid of such things. 

g) Exploit: When you see the born risks with the onset of the project, then you should definitely improvise your process to take full opportunity.

When does risk become an issue?

The probability of some risk can rise up to 100%, despite all the actions that are put into the mitigation or prevention. Once the risk is identified, it is then termed an issue. In such a scenario, the risk manager shall communicate the same to different project stakeholders. They will pass it on to an issue and, in turn, transfer it to the issue log.

Monitoring Risks 

After treating risks, they have to be closely monitored. Some risks, such as environmental Risks or market risks, have to be monitored closely. These risks are not easily treatable. You have to patiently wait and monitor the severity of the risks. You can protect your business operations from getting severely impacted by taking the necessary precautions, which can protect your company. 

You will also have to monitor the effects of the risks that are being caused to the employees associated with the process. In this Risk Management Process, you can employ software which can monitor the entire Risk Management system. This digital documentation and monitoring of Risks helps the organisation, its employees, as well as its stakeholders to review these risks anytime. This process of monitoring and reviewing helps in preparing reports, which can be crucial for the organisation in future. 

Enhance your knowledge more on Risk Management with our course on Risk Management Green Belt Course - join now! 

Benefits of Risk Management Process 

The following are some benefits of the Risk Management Process:
 

Benefits of Risk Management Process  

a) With the help of this process, businesses are able to mitigate Risks efficiently and protect their assets, whether tangible, like property or intangible, such as brand value. 

b) Decision-making is one of the most important tasks to make business operations effective and consumer-friendly. With the help of this process, businesses can understand the Risks, their causes and their effects. This understanding helps businesses make decisions accordingly. 

c) Understanding legal Risks, financial Risks, and market Risks is important, as they help organisations avoid major financial loss. With the help of this process, businesses can avoid these Risks and improve their financial stability and performance. 

d) The Risk Management Process shows the management, investors, and stakeholders understand which Risks are profitable and which are not. They can then invest in those Risks, which can help them generate a good amount of profits. 

e) This process helps in identifying the areas where the allocation of human resources is more required than the other. With the proper allocation of human resources, Risks can be mitigated in record time, saving businesses from incurring huge amounts of losses. 

f) With the correct business operations in place, the severity of Risks can be lessened. This increases the trust of the stakeholders in the organisation.  

g) It also helps in increasing the success rate of the projects that are undertaken by the organisation. Deftly handling Risks helps in the timely completion of projects. 

h) You must remember that not all Risks are bad for the organisation. This process identifies the Risks that come with every project and helps in nurturing calculated Risks for the organisation. Taking calculated Risks encourages innovative thinking for the employees. 

i) Mitigating Risks with the help of this process helps businesses to be more resilient to unexpected circumstances. People are more trained to be adept at handling any kind of complex challenges. 

j) The continuous monitoring and reviewing provide continuous feedback to the employees, which helps in both professional and personal development. 

Conclusion 

We hope that this blog has helped you understand the Risk Management Process and the several benefits that businesses can get by utilising this framework. Risks are going to be different for different organisations and even for different projects. However, if you follow this framework to approach Risks, you can effectively enhance your business operations. 

Improve your Project Management skills with Project Management Courses - join now! 

Frequently Asked Questions

What is the highest salary for a Risk Manager? faq-arrow

The highest salary for a Risk Manager can vary significantly depending on factors such as industry, location, level of experience, and the size of the organisation, but it can range from £72,000 to well over £144,000 per year.

What degree is good for Risk Management? faq-arrow

A degree in finance, business administration, economics, or mathematics is advantageous for a career in risk management. These fields provide essential skills in financial analysis, quantitative methods, and risk assessment.

What are the other resources and offers provided by The Knowledge Academy? faq-arrow

The Knowledge Academy takes global learning to new heights, offering over 30,000 online courses across 490+ locations in 220 countries. This expansive reach ensures accessibility and convenience for learners worldwide.

Alongside our diverse Online Course Catalogue, encompassing 17 major categories, we go the extra mile by providing a plethora of free educational Online Resources like News updates, Blogs, videos, webinars, and interview questions. Tailoring learning experiences further, professionals can maximise value with customisable Course Bundles of TKA.
 

What is Knowledge Pass, and how does it work? faq-arrow

The Knowledge Academy’s Knowledge Pass, a prepaid voucher, adds another layer of flexibility, allowing course bookings over a 12-month period. Join us on a journey where education knows no bounds.

What are related courses and blogs provided by The Knowledge Academy? faq-arrow

The Knowledge Academy offers various Project Management Courses, including the Risk Management Green Belt, Risk Management Black Belt. These courses cater to different skill levels, providing comprehensive insights into Incremental Refresh in Power BI.

Our Office Applications Blogs cover a range of topics related to Project Management, offering valuable resources, best practices, and industry insights. Whether you are a beginner or looking to advance your Power BI skills, The Knowledge Academy's diverse courses and informative blogs have got you covered.

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