What is Risk Management? - Steps in Risk Management System (2024)

Risk Management System

An integrated practice that helps business identify, evaluate, measure, and mitigate risks

What is Risk Management?

Risk management is a continuous process that involves the identification, analysis, and response to risk factors with a focus to control future outcomes by taking measures proactively rather than reactively. Risk management ensures that there are enough resources allocated to remedy or any risk-related opportunities. Effective risk management provides the ability to reduce both the possibility of a risk occurring and its potential impact. Risk management is also considered a learning and awareness tool that helps business leaders make the right decisions and create a safer work culture. Companies use Risk Management Systems to get a complete and accurate picture of the current risk landscape within the organization, including product lines, processes, and business units.

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  By creating a risk-based approach to health and safety, employees can be assured of a safe work environment

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  Risk management enables risk managers to analyze risks and develop strategies that maximize project success

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  As risk management promotes a proactive approach to mitigate risks, it reduces the element of surprise risk events

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  By analyzing risk patterns, risk managers can reduce repetitive losses thus saving the business unnecessary financial expense

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  Risk management includes all the employees which improve communication within the organization

How does Risk Management work?

In simple words, risk management prepares an organization to identify and manage various types of risks by developing risk approaches, assigning roles to employees, and reviewing risk policies periodically. An organization is said to have a good risk management strategy in place if its risk management procedures:

• Helped create value for the organization
• Became an integral part of the organizational process
• Contribute to the company’s decision-making process
• Address risks present systematically
• Account for contingencies and periodic review
• Can adapt to new changes and scenarios
• Can be easily reviewed and updated

Steps in Risk Management System

The risk management process is a framework for the proper actions that need to be taken to protect property, avoid accidents, and keep customers and employees from harm. There are five fundamental steps that are taken to manage risk beginning with identifying risks, analyzing risks, prioritizing them, implementing a solution, and finally, monitoring the risk.

Now let’s dig into how these steps are implemented in a more digital environment.

Customer Success

2 Leading US Companies use ComplianceQuest to Automate Risk Management and Maximize Occupational Safety

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Building a Risk Management strategy

Risk management is critical for all businesses. Implementing a risk management strategy is a five-step process:

• Identify all the main processes within the organization
• Design a risk management framework linked to these operations
• Define risk assessment tools, frequencies, and people involved
• Implementing tools that helps structure risk-based thinking
• Build in continuity despite changes in internal and external factors

Essentials of Risk Management process

The risk management discipline helps organizations understand the risks within the processes and helps manage these risks to avoid noncompliance penalties, product failure or recalls, and the welfare of the employees. According to ISO 31000 standard, the risk management process is a systematic application of policies and practices created by an organization to identify, analyze, evaluate, treat, communicate, monitor, and review risk. There are 11 key principles under ISO 31000 that are considered essential for risk management. These principles are as follows:

• Creates and protects value
• Considered an integral part of the procedures
• Part of the decision-making process
• Addresses all uncertainties within the organization
• Systematic, structured, and timely
• Based on relevant available information
• Customized
• Considers human and cultural factors
• Transparent and inclusive
• Dynamic and open to change
• Facilitates continuous improvement within the organization

Great software with a great team to back it up with!

We’ve been working with ComplianceQuest for about one and a half years (and going). The software itself is very well designed and will help any organization to satisfy QMS requirements. It fits hand in hand with SFDC platform and leverages all that cloud can offer. The software is very intuitive and users can be trained fairly easily. The CQ team is very knowledgeable — provided customization services tailoring to our needs.Would recommend 100%.

Andi Xie,
Continental Contitech

Be clear on respective responsibilities and tasks

Any gaps in responsibilities or tasks across your business could cause an increased opportunity for risk. So, organizations should make sure that every employee knows exactly what part of the business and what activities and tasks they are responsible for.

Identify potential risks at an early stage

The sooner you identify the risks, the easier it will be to manage the risk. So, businesses should think about risk management at the start of every project or task.

Always be positive

All the risks are not negative and may present opportunities to improve and grow. Take cognizance of the potential positive impact.

Explain risk appropriately

As part of the risk evaluation process, describe the risk properly, differentiating between cause and effect.

Evaluate and prioritize risk

Businesses use a risk matrix to evaluate and prioritize all existing risks. You can also estimate the severity of risk by looking at the probability and impact.

Take responsibility and ownership

If anyone in the organization sees any potential safety issue, suspected fraud, or security breaches, they should take responsibility rather than wait for someone else to rectify the problem. Risk management works best when everyone is empowered to make a stand and take action.

Learn from the mistakes

It would be great to use historical data and anecdotes to learn from the mistakes that happened previously, ensuring they are never repeated.

Use suitable strategies to control risk

To control risk properly, organizations should use the 4Ts model involving:

• Transferring risk: transferring to an individual, group, or third party to be responsible for the risk
• Tolerating risk: no action is taken to mitigate or reduce a risk
• Treating risk: controlling risk through actions that reduce the severity of the risk occurring or minimizing its impact prior to its occurrence
• Terminating risk: changing processes or practices to eliminate risk fully

Capture all risks in a risk register

To improve your information sharing and accountability, always capture all risks across the company, so that you can see who is responsible for what and appoint a risk owner too.

Continued monitoring and reviewing

The risk level we face every day is constantly changing with the new emerging and critical risks. It is important to have a risk management process in the workplace and also train your employee on what constitutes risk so that they know what to look out for and how they can contribute towards risk management by being proactive and regularly monitoring the risk factor.

• Be clear on respective responsibilities and tasks

  Any gaps in responsibilities or tasks across your business could cause an increased opportunity for risk. So, organizations should make sure that every employee knows exactly what part of the business and what activities and tasks they are responsible for.

• Identify potential risks at an early stage

  The sooner you identify the risks, the easier it will be to manage the risk. So, businesses should think about risk management at the start of every project or task.

• Always be positive

  All the risks are not negative and may present opportunities to improve and grow. Take cognizance of the potential positive impact.

• Explain risk appropriately

  As part of the risk evaluation process, describe the risk properly, differentiating between cause and effect.

• Evaluate and prioritize risk

  Businesses use a risk matrix to evaluate and prioritize all existing risks. You can also estimate the severity of risk by looking at the probability and impact.

• Take responsibility and ownership

  If anyone in the organization sees any potential safety issue, suspected fraud, or security breaches, they should take responsibility rather than wait for someone else to rectify the problem. Risk management works best when everyone is empowered to make a stand and take action.

• Learn from the mistakes

  It would be great to use historical data and anecdotes to learn from the mistakes that happened previously, ensuring they are never repeated.

• Use suitable strategies to control risk

  To control risk properly, organizations should use the 4Ts model involving

  • Transferring risk – transferring to an individual, group, or third party to be responsible for the risk
  • Tolerating risk – no action is taken to mitigate or reduce a risk
  • Treating risk – controlling risk through actions that reduce the severity of the risk occurring or minimizing its impact prior to its occurrence
  • Terminating risk – changing processes or practices to eliminate risk fully

• Capture all risks in a risk register

  To improve your information sharing and accountability, always capture all risks across the company, so that you can see who is responsible for what and appoint a risk owner too.

• Continued monitoring and reviewing

  The risk level we face every day is constantly changing with the new emerging and critical risks. It is important to have a risk management process in the workplace and also train your employee on what constitutes risk so that they know what to look out for and how they can contribute towards risk management by being proactive and regularly monitoring the risk factor.

ComplianceQuest Solutions for Risk Management

ComplianceQuest’s Risk Management Solution provides an entire and proper picture of the risk landscape across product lines, business processes, and business units. Risk assessments can be done from anywhere within the ComplianceQuest platform to analyze hazards associated with any process or activity such as audits, CAPAs, change, customer complaints, deviations, nonconformances, etc. ComplianceQuest’s Risk Management solution provides a comprehensive set of solutions, tools, reports and dashboards to identify, assess, evaluate, treat and monitor risks regularly across the enterprise. The CQ Risk and Compliance solution provides a framework for determining operational risk tolerance thresholds and policies complying with these thresholds are employed and followed for risk assessment and required analysis across the organization.

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