Taslim Ahammad : Risk is the probability of an unforeseen circumstance and its drawback. Risk management utilises the right tools, methods and processes to manage risk. For a business, exposure to risk could lead to disaster. It is important to make a determined effort into assessing as many conceivable risks and derive action plans to deal with those.
Risk management is the process to the practice of identifying potential risks in advance, analysing them and taking precautionary steps to reduce the potential threat or risk. When an entity makes an investment decision, it exposes itself to a number of financial and other risks. Thus, in order to minimize and control the exposure of investment to such risks, fund managers and investors practice risk management.
The reason of risk management is to detect potential threats before they take place so that risk-handling actions may be planned and appealed as needed across the life of the product or project to moderate adverse impacts on realising objectives. There are particular core values in concerns to risk management, such as; process should create significance, integral part of the organizational process, factor into the overall decision making process, clearly address uncertainty, need to be systematic and structured, based on the best available information, personalized to the project, need to take into account human factors, transparent and wide-ranging, dynamic and adaptable to change and continuously monitored and improved upon as the project moves forward. Control procedures include activities that may be taken to decrease the potential of experience to the hazard, or the control ration could be to eliminate the danger or to decrease the probability of the risk of the exposure to that danger being apprehended.
Benefit of risk management: Permit expert to anticipate the problems and utilizes the best minimise process of preventing danger and disaster, which could lead to sever financial crunch. Also, risk management meaningfully improves the possibility of the delivery of the business plan within the time frame, budget, decision making process, prioritizing skills and allocation of the resources and the capital.
Principles of risk management: (1) Process should create significance (2) It has to be an integral part of the organizational process (3) It has to be factor into the overall decision making process (4) It definitely clearly address uncertainty (5) It need to be systematic and structured (6) It has to be based on the best available information (7) It has to be personalized to the project (8) It definitely need to take into account human factors (9) It has to be transparent and wide-ranging (10) It has to be dynamic and adaptable to change (11) It need to be continuously monitored and improved upon as the project moves forward.
Risk management process: (i) Identification: Do a brainstorming session where all conceivable risks are itemized (ii) Planning: Define, plan for contingencies of the overall project plan (iii) Derive safeguards: Place exact ‘fall-backs’ into overall project plan for risks if they arise (iv) Monitor: Always monitor the project to determine if any un-expected risks (v) Avoid the risk: This may seem obvious, then again it is an actual technique (vi) Reduce the risk: Despite the fact some risks cannot be avoided, they can be reduced (vii) Share the risk: Few risk cannot be avoided or reduced, steps can be taken to share the risk in some way.
Risk management process results in: (1) Improving the decision making process, planning and prioritizing skills (2) Efficient allocation of the resources and the capital (3) Permit expert to anticipate the problems and utilizes the best minimizing amount of firefighting and preventing a disaster, which could lead to sever financial crunch (4) Risk management meaningfully improves the possibility of the delivery of the business plan, within the time frame and budget.
Monitor risk: Risk observing is important for the reason that it helps to highlight whether approaches are effective or not. Risk checking may impact upon the management of organisational risk for it may lead to define of new risks.
The starring role of the risk manager is to be responsible for a methodology to detect and examine the financial impact of loss to the organization, employees, the public, and the environment. Furthermore, get ready to risk management and insurance budgets and allocate claim costs and premiums to departments and unites
Having risk management plan in place, authority can ensure that it will protect the viability of business for the long term. Hence, it is time that the management of companies sits up and takes note and make strategy of the risks that their company may faces.
Taslim Ahammad, Assistant Professor
Bangabandhu Sheikh Mujibur Rahman Science and Technology University, Gopalganj, Bangladesh.