The systems and process which companies used to have back then for managing risk are now became outdated and ineffective this is the reason that risk management software is relative a new area specially in technology for organizations compare to what it was back then. Since it’s a new technology and process, every year it’s having some new update in its system and every year we get a need to update and educate our management s well with the new features of it. But if few steps are being followed then risk management system can be efficient enough then it was earlier. Risk management is difficult, but its of high importance specially in banking and financial sector. Risk, as it sounds itself that is of high importance and is a threat, risk doesn’t not need any definition because it’s a description in a name itself and if you tell someone about risk they will have an idea that some work is not doable and it should be stopped by now. People need to understand that risk is not something that you get from somewhere, it not contagious, but risk is inherent, it’s always available in system or your organization you just need to identify it, discover and see for the best possible solution to remove that risk.
You cannot resolve any issue if you don’t know the root cause or what is what?! Similarly, you can’t resolve the risk if you don’t know what risk is or what possible can go wrong. There are many ways to identify risk. First you need to know what kind of risk it is. There are four main categories of risk; hazard risk, operational risk, financial risk and strategic risk.
When any misfortunate event occurs like fire or injury, then it comes under a category of hazard risk. Operational risk occurs when any disrupt event occurs in business processes like turnover or supplier failure. Whereas financial risk, as it describes itself economic recession or risk related to company’s capital structure, financial transaction or any risk that is in monetary terms is financial risk. Last strategic risk, risk which includes new competitor and brand reputation and whenever company fails to plan that comes under strategic risk.
Now, organizations need to understand and identify that what category of risk are they facing then need to initiate to take possible actions accordingly.
Identifying Alternative Solutions
Before even some risk occurs, company should be sufficient enough to know and to predict that what would be risks that might target a company and it should always prepare itself with alternative solution for it. When such risks occur that company have never predicted or facing without any strategy then risk management system and risk managers would be efficient and skilled enough that they cope with the risk as earliest as possible also they should come up with alternative solutions for it.
It is understood that every organization has an authority to remove, control, accept, avoid or transfer the risk they always know what sort of risk is affordable or effective. Here, accepting the risk means that knowing and accepting the fact that this risk is inherent, and organization has nothing to do or worry about that risk. To avoid a risk, mean that organization will simply not participate in that risk or that action. Risk control means that organization will identify, mitigate and come up with the best possible solution for it and will try best to control such potential risk that to not happen in future. Whereas, risk transfer means that the moment an organization faces or identifies risk, it will not bear neither control the risk, but they pass it on to insurance or risk service providers.
To Evaluate Risk Results
Risk management is not project which once is done and then company thinks it gone and then forget about it. It’s a continuous and ongoing process which has faces and can always come back. The organization, its environment and its risks are always changing so its process can’t always be the same and also it should never be same since risk can occur in any of its faces and can target the system and organization. So, risk management should always be ready to face any sort of risk that might appear. Determining that the initiatives and process they are already having is still skillful and effective or there’s a need to change the process and a system now. Sometimes team have a need to start over whole process if the system becomes outdated or ineffective and start making new planning and they can also use available GRC tools for risk management instead of manually doing it.