What is risk management?

Working with systematic risk management helps you identify, analyze, quantify, manage and reduce risks that may affect the company.

It is an effective way to prevent problems and improve outcomes.

A risk is, in short, a threat that, with a certain probability, can lead to potential consequences.

Risk management is like braking on a car. Its function is to slow down, but its purpose is to allow us to drive fast.

By anticipating, identifying and managing risks that may affect your bottom line, you can prevent problems that may arise during financial difficulties before they have even occurred.

To be successful in risk management, you need to find out what risks may arise, assess them, develop action plans to deal with them and, of course, follow them up regularly.

You must also ensure that the necessary resources are in place to manage risks, take care of customer interests and adapt processes to meet changes in market conditions and customer needs.

At the same time, we need to consider what benefit risk management brings to the company. Do not forget to think from the perspectives “we as a company”, “me as a leader” and “me as an individual”. If we do not link the work to these three areas, it will be difficult to achieve significant impacts.

If we've learned anything from Covid it's that everything can change overnight — then it's good to be prepared.

If you intend to move towards ISO 9001 certification, you will hear a lot about risk-based thinking and that it is important for a quality management system to work. In short, risk-based thinking means that you plan and take actions to manage both risks and opportunities - i.e. work systematically with risk management.

In our opinion, it is not really systematic to work with risks if they live as an isolated activity disconnected from the rest of the company. If you want to get a better effect from your risk management, you should find ways to link and visualize risks based on the processes they affect and make this visible to the entire organization in a smart way.

How do I assess a risk?

There are several different approaches and frameworks to identify/map risks. Examples of tools are e.g. SWOT or PEST analysis. However, these tools are outside the scope of this article.

When identifying a risk, you need to make a proper assessment of it by:

1. Define the risk scenario
2. Identify potential consequences
3. Determine if the risk is realistic
4. Severity classification of risk with respect to a severity matrix
5. Calculate a risk number
6. Identify actions and set an action plan to reduce risk
7. Putting someone in charge
8. Set a deadline for managing the risk
9. Calculate an updated risk figure so that you can compare the risk in its current form against the risk in its managed form

If you repeat this and find a systematic approach to work, you will be well equipped to achieve success.

If you need help to establish effective risk management, just get in touch.

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