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Risk management

Why is risk management necessary?

What is risk management?

Risk management has become an integral part of the policy of almost every company. It is a continuous process that identifies and values ​​risks. It also determines how the probability of occurrence and the consequences of risks can be controlled. A sound risk management policy contributes to guaranteeing the continuity of an organization.

 

Why is risk management necessary?

Risk management is of great importance because there are sometimes lurking dangers that can be prevented or mitigated with an adequate risk policy. Think of bank scandals, reporting fraud and reputational damage. With a good risk policy, companies can better anticipate possible risks, so that they can take effective control measures and thus guarantee the continuity of the company. Moreover, implementing a good risk policy is a legal requirement for an increasing number of organizations.

Risk management should not be seen as an end in itself, or merely as a means to avoid sanctions from a regulator. Moreover, it not only reveals risks, but also provides insight into where opportunities lie. Also keep in mind that a risk policy must be in place to encourage people to think about risks, make conscious considerations and act accordingly.

 

Risk management is primarily a means for companies themselves to safeguard the continuity of their business operations. There are five basic steps you can follow for effective risk management. In brief:

  1. Risk identification. In this step you identify all possible risks that could jeopardize the objectives of your company. Think of strategic, financial and operational risks. Also distinguish between long-term and short-term risks.
  2. Risk analysis. After identifying the risks, you analyze the collected information. Consider which risks may pose the greatest threat and deserve the most attention.
  3. Control. You decide which risks deserve your immediate attention and which are less urgent. After the risks have been identified and analysed, you can choose the rule from four responses: avoid, transfer, control/reduce or accept.
  4. Monitoring. Since risk management is by definition a continuous process, monitoring is crucial. To constantly effectively manage the possible risks, it is key to continue to monitor threats. Also schedule a risk analysis on a regular basis.
  5. Report. If you really want to embed risk management within your organization, you will have to make the steps taken transparent for your entire company. Finally, make employees aware of the importance of risk management by giving them regular updates on the risks you have researched and the possible strategies you have implemented.

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