Statistics have proved that most of the risks encountered in organizations are caused by mistakes that could be prevented if management teams employ the relevant risk assessment and management techniques (Vaughan, 1997). There are numerous benefits accrued by organizations that take time to identify the different risks that they are susceptible to, analyze them and come up with measures to control and manage them.
Risk identification entails the assessment of factors that are likely to cause adverse effects on an organization as well as individuals working in an organization. It also involves determining the level of organizational, infrastructure and employee exposure to risks (Barrase & Scordis, 2003). The main significance of risk identification is to help an organization cut down on losses that may result from the risks as well as improve organizational efficiency. Generally, employees are reluctant to work in organizations that realize that they subject them to risks. Consequently, it is difficult for such organizations to get and retain qualified employees. Besides, such organizations incur high rate of employee turnover thus affecting their productivity.
To facilitate in risk identification, organizations ensures that they have come up with risk management committees. These committees are given the responsibilities of identifying and dealing with risks that are likely to affect the organization. The committees are led by risk managers who oversee the process of organizational evaluation to identify risks threatening the organization (Barrase & Scordis, 2003).
Risk analysis calls for the analysts to dig deeper into the risks and identify their causes and effects on the organization. Risks in an organization may result from systems failure, equipment failure and human error. As a result, the analysis helps the management get a clear picture of the root cause of the risk as well as the repercussions of the risks on the organization. The ultimate significance of risk analysis is that it helps in laying down strategies to cater to the risks. Moreover, risk analysis leads to the management team understanding the various risks the organization is susceptible to as well as loopholes within the organization that may lead to the risks occurring. The reason why organizations are unable to mitigate hazards caused by risks is the lack of proper mechanisms for risk analysis. It becomes hard for the organizations to identify the risks that may befall them and their causes (Redmill, 2002). In most cases, organizations respond to risks after they have already occurred. This makes it hard for such organizations to seal all the loopholes that contribute to their occurrence.
In a bid to analyze risks prior to their occurrence, organizations are currently adopting risks analysis systems. For instance, organizations are currently using Human Reliability Assessment (HRA) systems to analyze risks caused by human errors. Initially, the system helped in analyzing risks caused by employees during operations. However, steps are underway to modify the HRA system to facilitate in analyzing risks caused by managers during supervision and duty scheduling (Redmill, 2002).
Risk management and control comprise the entire process of identifying and analyzing risks that are likely to occur within an organization and then coming up with measures to mitigate their effects on the organization or prevent them from happening. During risk control and management, organizations assemble the requisite tools required to address the penalties caused by risks. In addition, organizations identify risks before they strike thus responding to them accordingly.
Risk management and control have numerous benefits to organizations. Through risk, management organizations make informed decisions thus prioritizing their resources and investing in projects that are less vulnerable to risks. In addition, organizations cut down on operating costs as well as losses caused by risks. Risk management gives room for risks prediction. Consequently, organizations equip themselves with the necessary resources thus preventing the risks from occurring or mitigating their impacts (Vaughan, 1997). A strong risk management strategy helps in improving organizational efficiency and reputation. Since an organization is capable of foreseeing the risks that are likely to occur, it lays down strategies for countering the risks prior to their occurrence. As a result, it experiences limited interruptions in its operations thus delivering its products or services as per the plan.
One of the methods used by organizations in risk management and control is contingency planning. Organizations understand that it is difficult to prevent the occurrence of some risks. As a result, they devise plans to mitigate their effects. This guarantees the continuity of the business in spite of the risks (Vaughan, 1997). Besides, organizations invest in novel resources as a way of risk management. For instance, most companies have insured their assets against different risks such as theft and fire. Consequently, an organization is compensated if the risk occurs thus ensuring its continuity.
Risk management entails risk identification, analysis and control. It is difficult for an organization to manage its risks if it is not aware of the risks that are likely to affect it. Hence risk identification helps the organization to understand the factors that threaten its operations and productivity. For effective management of the identified risks, an organization ought to analyze them so as to determine their origin and effects on the organization. Understanding the root cause of the risks helps an organization to come up with strong measures for dealing with the risks.
Reference List
Barrase, J. & Scordis, N. (2003). Corporate risk management. Review of Business, pp. 26-29.
Redmill, F. (2002). The significance to risk analysis of risks posed by humans. Engineering Management Journal, 12(4), pp. 1-8.
Vaughan, J. E. (1997). Risk Management. Canada: John Willey and Sons Inc.