Risk Management Processes Essay Example | Topics and Well Written Essays - 2000 words

Risk Management Processes - Essay Example Risk has been known to be unavoidable; as a result, every individual and organisation needs to ensure that they manage risk to a level which is tolerable or acceptable depending on its â€Å"risk appetite†. Resources available for managing risk are finite. Therefore, individuals, entities and organizations should strive to achieve an optimum response to risk, prioritised according to an evaluation of the risks. Risk Management There has been various definition of risk management. Eppler and Aeschimann (2008) defined risk management as ‘an effective method that is critical in minimizing hurting effects of risks and optimizing the benefits of risky situations’. Risk management can be deduced to mean taking measures that are defined and should be able to reduce the potential risky results of specific action in various socio-political and economic climates. Identifying, analyzing, minimizing and monitoring risk is the very essence of risk management. Risk management i s the process of helping organisations and managers make the best use of resources available to them given unpredictable situations. When organisations apply risk management, they address systematically the risks that face their events and processes. The ultimate goal of managing risks is to achieve augmented benefit across portfolio of their activities (IRM, 2002). Risk management process entails activities aimed at assessing risk, and engaging in activities that help reduce risk to levels that are acceptable and able to maintain the level of risk. Eventually, an organisation would ensure that risks are analyzed in relation to existing potential benefits, putting into consideration existing alternatives, and, finally, implementing the best course of action according to management goals. Risk management involves the process of risk analysis that studies people’s interactions and various risks in relation to their surroundings. It is believed that humans are responsible for cr eating risks while at the same time bearing its burdens or at the same time assume both roles in their quest of trying to reduce personal risks. In any organisation, risk analyses that are effective should be able to involve all relevant fields including social science, natural science and engineering (Fischhoff, 2005). Risk management is known to be different in many organisations depending on its size, type, outcomes, the purpose of their existence and the role they play especially in delivering goods or services. Organisations that exist in the private sector main purpose is mainly directed towards enhancement of shareholder value; at the same time organisations in the public sector main objective is to deliver services for the benefit of the public. Whatever the type and purpose of the organisation, achieving and delivering their objectives is surrounded by uncertainty that would bring about threats to success at the same time provide opportunities for increasing success. Risk m anagement consists of the process of analyzing and interpreting risk, at the same time, it also involves the process of identifying and analysing details and level of formation of systems. The subject also includes the process of collecting and analyzing data on different component of risk and finally, interpreting the Risk Assessment output. In risk management, risk mitigation involves the selection and implementation of security controls to reduce