Risk Management Elaborated
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Prior to discussing risk management we want to comprehend what is 'risk'? A risk is doubtfulness of ending. When an action is taken, and the chance of the outcome is vague, it is called as risk. There are risks involved in every action that is taken. Setting up a business is a risk, exchange a house is a risk. The topic of risk management has diversified so much that from risk management of economic institutes to software have all become specialised fields. What is understood or practiced commonly as risk management is explained as under.
1. Identification of a risk 2. Working out the probability of risk occurring 3. Determining the consequences of a risk occurring 4. Finding ways of reducing a risk 5. Reducing the probability of a risk occurring.
Before starting out on any project, all kinds of possible risks that can happen and tune into a reality are recognized. Let's consider an easy example; if you go to cross a street, you open yourself to the risk of being hit by a speeding car. If it's a busy street with a lot of traffic, the likelihood of this occurrence becomes even higher.
Now if a speeding car hits you, the least that can take place to you is that you might get small cuts and bruises. The worst effect would be you being killed. Now, when you know what the results of taking a risk can be, you will find a way of diminishing the risk. How do you do that? In this case you will come across the close pedestrian crossing the road and use it. In this manner, you will be decreasing the risk factor involved in crossing an active street.
Risk management in any project follows the same basic values. When a credit card company issues you a credit card, they initially go for a credibility check. They check to observe if you will be clever to pay back your bills. Based on your income and your expenditures they issue you a credit card. If they sense that you are at a larger risk they will cap the credit limit in view of that.
Insurance companies take a risk when they sell insurance. For instance, an insurance company sells general insurance. They have some sales agents who are trading insurance. Now, if the insurance company comes across the fact that eighty percent of the shops and offices in a building have been covered by them, they will straight away 'spread' the risk. How they do it is by getting underwriting companies to cover part of the insurance. If the building is on fire, the insurance company plus the underwriters would stand the loss. In case the insurance company does not spread the risk, they would have to pay the whole insurance and the company is likely to fold up in such a happening.
In the same way, a bank is under risk if they put in all their resources in a particular enterprise. If the enterprise does not make the grade, the bank will fail. In property, stocks, and any other industry, risk management plays a vital role.
In factories and work places risk management teams weigh up the possibility of failure occurring. Then they recommend techniques of decreasing the prospect of that risk to take place. Making workers put on shielding and safety gear is a means of risk management.
The gist of risk management is to try to decrease the chances of a calamity from occurring. Identifying probable risks and decreasing the probability of its occurrence. There are mysterious risks that can occur and are generally unseen when doing risk management. Just like an earthquake in an area that has no record of earthquakes and is not on a defected line. Such a risk would be left out of the range of risk management.
Article Source: Articlelogy.com
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