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Risk management involves identifying and evaluating potential risks, creating a treatment plan, and ongoing monitoring. It is typically used by businesses to manage and insure against risks, such as employee injury, fraud, technology, and market fluctuations.
Risk management has to do with anticipating and analyzing the types of risks a person may face and how to avoid or deal with them. The risk management process is a simple process consisting of five steps. While it can be applied to determine personal risk, it is typically used by businesses to understand what risks they may face, how to manage them, and how to insure their businesses.
The first step in the risk management process is to identify the risks a business could face. Depending on the size and purpose of the business, the risks may vary. Some risks may pose short-term or long-term threats. Some of the more basic risks involve employee injury, fraud, technology, and market fluctuations.
The next step in the risk management process is to analyze or evaluate which of the listed risks will have the greatest impact on the business. In addition to prioritizing risks, the risk manager will need to determine which risk factors the company has control over and which not. After evaluating each risk, they need to be evaluated. To complete this step, you need a list of business goals and objectives. By specifically assessing how each risk may impact the company or business objectives, the company will be better prepared to manage the outcomes.
The fourth step in the risk management process is creating a treatment plan. Based on each risk and its influence on the company’s objectives, the risk manager must determine what can be done to address each risk. Creating a treatment plan will require deciding which risks can be avoided and which can be reduced.
The treatment plan should detail the steps that will be taken to avoid or reduce the impact of each individual risk. The plan should also include how to deal with unavoidable risks. The company should decide how to manage risks that have small impact on the business and how it will manage those that can alter the course of the business plan.
The last step in the risk management process is ongoing risk monitoring. This is a step that should occur throughout the life of a company, so it’s not so much a step as a continuous oversight on the effects of risk. Monitoring should occur at every level of the business to provide a comprehensive view of the impact of risk.
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