Organization risk management is a type of business process management strategy. It aims to identify, understand and prepare for the types of threats, hazards, and other potential deviations from standard operating procedures that may be perceived as risks.
Organization Risk Management: Key Areas
Risk management processes cover four main areas:
- Threat Risk Management
- Internal control
- Internal audit
- Compliance with regulatory requirements
Threat Risk Management
To assess threats, risk managers follow the following five steps:
- Determining the likelihood of risk
- Assessment of the frequency and severity of consequences
- Identifying alternative approaches, including business process optimization, that will reduce the likelihood and consequences of risk.
- Selection and implementation of actions identified in the previous step
- Monitoring the implementation of actions and adjusting them as necessary
This process is focused on preventive and anti-crisis risk management.
Risk Management Should Distinguish Between The Concepts Of Risk, Threat, And Impact:
- Risk is a negative or positive phenomenon that can occur and have an impact on the process/project
- Threat – the possible danger that the risk carries
- Impact – the magnitude of the consequences that occur in the event of a risk
- Risk magnitude = likelihood of risk occurrence * impact
Internal control is a mechanism for ensuring the execution of business processes following the requirements that reduce the likelihood and severity of the consequences of risks.
Internal control processes improve the efficiency of business processes in general and, particularly, processes related to reporting and ensuring compliance with regulatory requirements. Large organizations, especially those operating in highly regulated areas, often have extensive internal controls.
Also Read: Business Process Improvement Plan