What Is Risk Management And Why Is It Important?

Ken Walker

What Is Risk Management And Why Is It Important02

 

Risk is a necessary part of life if you’re going to grow and expand. If you want a business to succeed, risks are part of it. What Is Risk Management: Risk is any event that has an uncertain outcome which can be either positive or negative. Positive outcomes will help grow your life. Negative outcomes are less helpful.

Establishing risk management goals

Risk management is the act of looking right at these risks, evaluating them, and managing them in a way that helps you reap the most benefits and eliminate the potential hazards.

The goal of risk management is to take risks in a calculated manner so you work to minimize threats and maximize the potential for positive benefits.

In Australia, the Occupational Health and Safety (OHS) legislation requires that all businesses (of any size or business type) works a risk management process.

The process requires the business to understand risks, analyze them, and address the risks, either eliminating potential negative outcomes or controlling them.

Then, it also requires you to regularly review the risks to be sure they’ve truly fixed any problems without creating new ones and that no other risks have evolved.

Why Risk Management Is Important

When you implement a process for managing risk, you notice potential hazards you might not have seen otherwise. This improves the workplace for employees by creating a more safe and healthy work environment.

It helps prevent workplace injuries and reduce the severity of those events.  It can improve their capacity to work and therefore their productivity and the quality of the work they get done.

Part of running a business you can be proud of is having a safe and healthy work environment. Implementing a risk management process is the best way to make that a reality.

 

What Is Risk Management And Why Is It Important

 

 

What A Risk Register Is

Before going over the process for risk management, you should know that during the process you’ll be creating a risk register.

The risk register is a written record of information about the risks identified during the process, the level of risk it represents, who is responsible for that risk, and what will happen to respond to that risk.

This written record, known as your risk register, can be done in a spreadsheet or by using project management software.

A Five Step Risk Management Process

People new to implementing a system assume that will include a lot of percentages and fancy business words. In truth, this is a simple process, and that’s part of what makes it effective. A complicated process would be difficult to follow and have room for errors.

While every risk management process you come across may use different terminology, they all follow the same basic steps.

 

Step One: Identify the Risk

This is where your team discovers risks. You comb through your business or your projects and name every risk that could have an affect on your business or your employees. The risks are then noted in your risk register.

Step Two: Analyze the Risk

Now that you have a list of potential risks listed in your risk register, it’s time to determine how likely those risks are to occur and what the potential outcomes would be. Again you note your observations in your risk register next to the identified risks.

Step Three: Evaluate the Risk

Now that you have a list of potential risks and the outcomes that could happen, you will add to this list with a third column of how likely the risk is to occur and how severe the negative outcome would be if it did. Is the risk serious enough you should do something about it? Rank your risks in your risk register.

 

Step Four: Treat the Risk

This is where you need to decide on a course of action for addressing every risk in the list. You begin with the risks ranked the highest from step three. What can you do to maximize the potential for positive outcomes from these risks, and what can you do to minimize the likelihood of negative outcomes? This is where you are likely to create contingency plans and preventive measures. Again, you note down your solutions in your risk register.

Step Five: Review the Risks

This is why you created the risk register in the previous steps. Step five will be repeated on its own regularly. This is where you return to your register and you review your list. Use it to monitor how these risks change and progress. Did you solve any of the risks? Did you create new ones when you tried? How have the risks evolved? Are they more or less likely to lead to hazardous outcomes now?

In conclusion, regularly returning to your list and reviewing it is the best way to ensure that the plans you put in place during the risk management process are actually working and that your workplace is a safe and healthy place for all involved. 

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