An internet search on Risk Management Techniques yields lots of results on subjects like insurance, OSHA standards, financial safeguards, issues related to environment protection and sustenance, government legalities, and computer backup systems. While all these are elements of risk control, they do not in themselves help your business to identify the risks it faces.
The Five Point Risk Management System
The success of a Risk Management System requires a business owner to comprehensively follow the steps laid out in the system and practice strict adherence to the rules. A good Risk Management System should include the five steps below:
1. Identifying Risks: These risks could be due to fire or forces of nature, risk of obsolescence, competitive products or theft (of tangible as well as intangible material)
2. Quantifying Risks: Identified risks need to be quantified in terms of potential loss of income and reputation caused by the actual loss, as well as further loss of income until the risk is tackled and eliminated
3. Formulating Strategies to Contain the Identified Risks: As has been said earlier, you cannot run a business without running a risk or taking a chance. What you can do, however, is to contain the risk so as to limit potential losses
4. Implementing Strategies: Strategies, no matter how good they are, are useless unless they are put into practice. Putting strategies into practice also helps to evaluate their utility and identify company shortcomings.
5. Continuous Monitoring of Risk Containment Tasks: Risk containment tasks have to be constantly monitored to ensure that the risk that they present is tackled promptly and thereby minimized. Continuous monitoring ensures that the changing needs of the business are met
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