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To be effective, risk management should be an integral part of everyday business management. A regular and robust process should identify and manage acceptable levels of risk before they turn into disputes. Without a robust procedure for identifying and dealing with risk, the information, reputation and finances of a business are all in danger.
Establishing a strong process brings benefits from day one.
1. Raised awareness of significant risks.
The biggest danger to a business is failing to identify a risk until it's too late. This can be costly in terms of reputation, security, money and internal morale. Early identification of threats empowers a business to categorize and prioritize risks and to deal with them in a timely and effective way.
2. Recognition of responsibility and accountability.
Having identified possible risks, a business can then assign the most relevant party (internal staff or external experts as appropriate) to deal with them. A strong risk management process will ensure that once assigned, a risk can be tracked to ensure it is deal with on time and effectively.
3. Identification of new opportunities
Identifying and dealing with risks often presents a company with new opportunities that would have otherwise gone undiscovered. For example, where problems in remedying threats occurs a company is presented with the opportunity to review and strengthen internal policy and procedures. Risk assessment will also present opportunities at an earlier stage to explore new ways of doing things and alternative courses of action should a problem occur.
As part of a risk management process there should be opportunity for constant review to discover ways to improve business practices and reduce future threats.
4. An action plan for effectively dealing with significant risks
Unfortunately it's all too often the case that a company is unaware of a risk before it becomes a significant threat to their business.
An effective risk management process will include an action plan. This will include well thought out actions for implementation should risks threaten to become significant.
Apart from saving a company from valuable business losses, being prepared in this way plays an important part in protecting their external reputation should 'fall out' from the risk become public.
5. Enhanced corporate communication
The need to deal with risks in an effective manner instills a culture of communication through an organization. It is rarely the case that a risk is deal with in isolation and will call on interdepartmental teams to communicate with each other on a regular basis. It also welcomes better communication from management board to stakeholders with the news of how risks are being better managed.
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