What is Risk Management?
In its simplest form, risk can be defined as ‘the loss resulting from inadequate or failed internal processes, people and systems or from external events’. Risk management is therefore a matter for every organisation.
In broad terms risk management is the process of identifying, assessing and then taking appropriate steps to either eliminate or reduce the key risks faced by an organisation where it is practical and cost effective to do so,. Thus, proportionate arrangements can (and indeed should) be put in place by all organisations to minimise the probability and impact of the risks they face – or to deal with the consequences if an external risk cannot be fully controlled or eliminated!
Risk management therefore presents numerous challenges as it reflects the inevitable fact that assets, processes and people can fail or can be damaged by external events.In turn this can lead to consequences that are both unplanned and unwanted.
A key component of risk is what might be termed “Operational risk” Clearly this affects all businesses and relates to those elements that fall within an organisation’s operational remit. These can often include:
- Process and procedural robustness and integrity including legality and compliance with legislation, the latter being both general and industry specific
- People, skills and training
- Insurance and self-insurance
- Supply chain, outsourcing and inherited risk
- Infrastructure, systems and telecommunications
- Physical and information security
Risk has two main components; impact and probability. Impact is a reflection of the pain or loss or discomfort that may be caused by an event. Probability (sometimes referred to as likelihood) is an indication of how often we can expect a particular event to occur. Taken together, they give an indication of our 'exposure' to risk – i.e. how much we can expect to suffer as a result of unwanted or unplanned events.
RSM Tenon offers a number of risk management solutions to help you manage risk as follows: