Risk is an inherent element of all business operations. Identifying threats and managing them effectively helps organizations to reduce or eliminate potential negative effects and ensure business security.
Every business and investment activity involves risk. It is impossible to eliminate the risk altogether, but there are strategies that allow to protect against some of the risks or partially reduce their negative impact.
It should be noted that risk management is an ongoing process. It requires a proactive approach and continuous work on risk identification, devising actions to be followed if risk materializes and monitoring effectiveness of those actions.
Risk management is associated with every business area and plays an extremely important role in the operations of every business and process performance. The most common business risk categories are:
In most business projects, operational and legal risks are the most common, although their nature and probability largely depend on the specific features of business and its projects.
Risk management should cover all company areas. There are four key steps in this process – identification, assessment, control and action. It is extremely important to start identifying threats at the very commencement of a project. In subsequent stages, the risk is monitored, which allows to take the necessary actions to minimize and limit its negative impact, and to correct the previously implemented mechanisms that turned out to be ineffective.
The risk management process is complex and multistage, but if it is implemented effectively, it notably increases the security of business and individual processes.
It also results in cost reduction and even maximizes profits.
Risk management is not only about identification, reduction and elimination of risk but also assessment of its impact on business and financial results. This, in turn, is a part of strategic management process designed to reduce uncertainty and achieve long-term goals, thereby increasing profits.
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