5 Key Steps to Effective Risk Management

In modern times, a company that does not manage risks has a hard time surviving in the market. For those who are not yet familiar with the term, Risk Management is a set of activities aimed at managing and controlling a company in relation to potential threats. This includes everything from planning and use of human resources to materials acquired to prevent or treat a risk.

The ultimate idea behind all of this is the continuous improvement of the company's processes in order to enhance business. We have already covered this topic recently on the blog and, to read the post, just click here. click here.

Many companies have already understood the warning sign about the importance of this management model, however, some still do not know how to do it effectively.

In this post, you will be able to check out the fundamental steps to be successful in corporate risk management.

Fundamental steps to manage corporate risks

Companies usually have specific departments responsible for this type of management. Their mission is to map out threats and develop prevention strategies. They are also responsible for implementing and encouraging all employees to ensure that everything goes according to plan.

For good planning to be done, there are 5 fundamental steps. They are:

1- Identification

To map risks, it is necessary to know the entire company. It is necessary to understand the weaknesses and vulnerabilities of the business. It is necessary to know what stage the company is in, whether it is maturing, in a growth, expansion or consolidation phase. Once these points are established, it becomes easier to identify, understand and analyze risks.

2- Qualitative Analysis

After mapping the risks, it is time to listen to the company's managers to understand the processes and activities of each sector. Through qualitative analysis, it is possible to define the level of importance of each risk, as well as the probability of its occurrence.

3- Quantitative Analysis

This stage consists of investigating, through data and numbers, the potential impacts and effects that the identified threats can cause for the company.

4- Response Planning

This is the time to list the risks in order of importance in order to develop a prioritization scale. The idea is to create a prioritization scale from the greatest impact and probability to the least. Then, a plan should be created to monitor and eliminate the threats. The methods defined for solving the problems should be specific and based on facts.

5- Monitoring

We have reached the final stage. At this point, it is necessary to monitor whether the prevention processes are being carried out, in addition to analyzing how the risks are behaving. There are several tools that can assist in this action, generating systematized controls, reports, performance indicators, control mechanisms, etc.

What did you think of this post? Share your thoughts on the subject in the comments!

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