A risk is an uncertain event that, if it occurs, can impact your goals positively or negatively. It is important to understand the potential for a risk to have either a positive or negative effect as against the usual natural opinion that risks always come with negative effects. Meanwhile, if you are open to the risks that have or create positive opportunities, it can enhance your chances of running the project smarter, more streamlined and in fact, more profitable.

Risk management is what you should do frequently- as a project manager or team member. Even more importantly, include this activity on your list always. This will help to manage every risk associated with your business and apply the principles to your projects for a smooth, seamless and efficient running of your operations. Also, to ensure you enjoy a positive experience for all involved.

The old saying goes thus, “Accept the inevitable and turn it to your advantage.” This is exactly what you do when you put in the effort to mitigate project risks and make opportunities from them.

You might be unsure of the likelihood of an event to occur. In the same way, you may not be certain of the consequences if it occurred. Therefore, the likelihood- which is the probability of an event occurring, and consequence– which is the impact of the outcome of an event, are two main elements that determine the magnitude of the risk.

Risk management, which requires a strategic approach, is one of our responsibilities at The Swiss Quality. We boast of skilled, experienced, and professional business consultants who know the best way to go about minimizing risks and managing them appropriately lest they end up having an adverse effect on your business.

Processes of Risk Management

All risk management processes follow the same steps, basically. These five steps combine to deliver a simple and effective risk management process to any business in any sector or industry.

Risk Identification

The risk identification stage is where we deploy our team of certified risk managers to help uncover, recognize and describe the risks that might affect your project and its results/outcomes. We introduce several techniques to identify your project risks. According to the PMBOK, it is at this stage that the project risk register is prepared.

Risk Analysis

This step follows the identification of risks. Having known the risks, you can then determine the likelihood and consequence(s) of each risk. Develop an understanding of the risks uncovered and their potential impact on the goals and objectives of the project. This information, according to the Project Management Book of Knowledge, is an input of the Project Risk Register.

Risk Evaluation or Ranking

The first attempt with ranking or evaluation of risks is by determining their magnitude- which is the sum of the likelihood and the consequence. Here, you decide whether the risk is acceptable or significant enough for treatment. Include these rankings in your project risk register.

Risk Treatment

Another name for risk treatment is risk response planning. Under the risk treatment process, you have to assess the highest-ranked risks. Thereafter, set out a plan to treat or adjust the risks to achieve acceptable risk levels. But there is the question of how to minimize the probability of the negative risks and enhance the opportunities risk management. Creating risk mitigation strategies, preventive plans, and contingency plans are done in this step.

Risk Monitoring and Reviewing

In this step, which is the last, you use your project risk register to track/monitor and review risks.

Again, since risk talks about how uncertain an event could be, putting a framework around such uncertainty limits the options or chances of failure and de-risks your project activities. This also means you can be more confident to achieve your  project goals.

When you conscientiously identify and manage a comprehensive list of project risks, you are automatically reducing the unpleasant surprises that might come up later on. You will also discover more golden opportunities for the business.

Not only that, the risk management process aims at assisting with resolving problems whenever they arise because they were foreseen and plans are being put in place to treat them.

TSQ Risk Management

Types of Business Risks

Businesses, irrespective of what types, face several kinds of risks. Some of these risks can cause tremendous loss of profits or in extreme cases, bankruptcy. While large companies are putting up risk management departments, the smaller ones are not assessing the concern strategically enough.

Regardless of the size or type of your business, you are likely to face any of these challenges:

Strategic Risk

For a business to be successful, it undoubtedly requires a comprehensive and well-laid out business plan. But because things change over time, your supposed best-laid plans can be outdated in little or no time. This is a strategic risk. It is the risk that your company’s strategy becomes not as effective as it used to be, and your company now struggles to achieve its goals. It ranges from technological changes to a powerful new competitor entering the market, spikes in the costs of raw materials used for production, massive shifts in the demand of customers and other large-scale changes.

Compliance Risk

We all do not always comply with all the laws and regulations applicable to our businesses. We wish we could. However, because of the constantly changing laws, there is a consequent risk that you will encounter more regulations in the ‘near’ future. As a result, while your business expands you might discover you need to comply with new rules that you didn’t have to pay attention to earlier.

It doesn’t matter if your business is not expanding geographically, you can still incur new compliance risks into your business when you expand your product line. More so, if your business does not change over time, you could still get hit with certain new rules at any point in time.

Think of this as an example- say a new data protection rule requires that you beef up the security of your website. Or let’s say your employee safety regulations demand that you invest in a piece of new, safer equipment for your business. These things involve costs and present a compliance risk to your business. When this goes extreme, it can affect the future of your business and become a strategic risk at the end.

Operational Risk

The first two types of risks- strategic and compliance, stem from external events. Have you ever thought your own company could also be a source of risk? Operational risks are some unexpected failure in your daily operations ranging from server outage to technical failure, or problems caused by your employees or even your processes.

Sometimes, however, operational risk can also be from events outside your control. These are natural disasters, power cut or certain problems with your website host. Operational risk, on the basic level, is anything that interrupts the core operations of your company.

Even though the events can’t compare with the large strategic risks, operational risks can still have a huge impact on your company.

Financial Risk

Virtually all categories of risk have a financial impact especially in extra costs or lost revenue. The category of financial risks, however, refers directly to the influx and out-flux of money in your business and the possibility of an unexpected financial loss. When you have a lot of debt, your financial risk increases especially if a lot of it is a short-term debt due soon. Financial risk increases when you conduct business on the international stage.

Reputational Risks

There are diverse kinds of businesses but all of them have this thing in common- irrespective of what industry you are in. Your reputation is primary. In case you suffer a damaged reputation, you will see the impact on loss of revenue because customers are now wary of dealing with you. This is not the only effect though. It also means your employees may lose morale and may turn their backs on you- seeking other places to work.

Actually, it might be difficult to hire good replacements because potential candidates have heard about your destroyed reputation and are not interested in joining your firm. Suppliers will now offer you terms that do not favor you and advertisers or other partners may even decide that they no longer want to deal with you.

You will agree that the uncertain economic times of the previous years have had a massive effect on the ways companies operate nowadays. To be specific, companies that used to operate smoothly with forecasts and projections no longer make business judgments set in stone. They now have a renewed focus, which is to manage risk. So, when you face internal and external factors that literally make it uncertain and someway affect your chances of achieving or exceeding your objectives, you are dealing with risks. The effect on your firm and your objectives is the risk.

The importance of risk management cannot be over-emphasized because, without it, you possibly might not be able to define your objectives for the future. Any company which defines objectives without considering risks is likely to lose direction when these risks hit them.

Because of the prevailing focus on this subject, we capture risk management services and consulting in our offers at The Swiss Quality.

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