Risk Management For Your Business
Risk management is defined as the process of making and implementing decisions that will minimize the adverse effects of accidental business losses on an organization.
Making these decisions involves a sequence of 5 steps:
- Identifying and analyzing exposures to loss,
- Examining feasible alternative risk mgmt techniques to handle exposures,
- Selecting the most appropriate risk mgmt techniques to handle exposures,
- Implementing the chosen techniques,
- Monitoring the results.
Practical Risk Management For Your Business
Implementing these decisions requires performing the four functions of the management process: planning, organizing, leading, and controlling resources and increasingly managing risk is becoming part of the everyday business planning and decision making.
Risk Management Strategies
A sound risk management process is important and should be embedded in an organization’s policies, procedures and culture, but ultimately risk management strategies are needed to address identified risks. Traditional risk management strategies for handling risks include:
- Risk retention – Identifying and accepting the risk and its potential consequences
- Risk transfer – Contractual (i.e. buying insurance) or non-insurance (e.g. Hold Harmless Agreement)
- Risk control – Professional engineer conducting a site assessment
- Risk avoidance- Choosing not to sell a certain product because it is to risky
Other techniques used for other types of risk (e.g., credit, operational, interest rate risks) include financial tools such as hedges, swaps, and derivatives. See also Contractual risk transfer; Risk control; Risk financing; Risk management; Risk management process; Risk retention; Planning; Organizing; Leading; Controlling.
There are many professions and organizations (including RIMS and ORIMS) that are great resources to assist in developing risk processes and strategies for your business. In addition, when developing risk processes or strategies input from as many stakeholders as possible including an organizations accountants, lawyers, finance & operations team and your risk advisor / insurance broker typically produces the best results.
An ALIGNED Advocate can provide expert guidance about insurance and managing risk within your organization. Talk to one of our advocates today about how we can help you secure the best products, services and insurance solutions for your business.
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