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Risk management

What is a risk? Definition: An undesirable future event. It is also uncertain whether it will occur, which actually includes all future events. There are several types of risks you can consider, including:

  • Things that are likely to happen.
  • Things that will have a big impact, should they happen.
  • Things outside of your control. So you just have to manage your way around them.
  • Things you know very little about, including not knowing how likely they are to occur (in this case, you can only use the potential impact of the risk as a guide to whether prior action is of value).

Risk management includes:

  • Risk identification: Identifying potential risks and prioritizing them for action. This means sorting out the risks that are worthy of up-front action on reduction, contingencies and/or monitoring from those that you will 'manage on the fly' (i.e. you won't bother with them until they hit you in the face).

    • For example using Risk Exposure or a Risk Matrix.

  • Risk reduction: Acting to reduce the probability of targeted risks occurring and/or the impact, should they happen. (If you're lucky, you'll be able to eliminate the risk altogether, or possibly reduce it to a 'manage on the fly' risk.

  • Contingency planning:  Where you cannot reduce risks to 'manage on the fly' status, you may want to prepare people, equipment, actions and processes to 'put on the shelf' in case the risk occurs.

  • Risk monitoring: Setting up measurement and other monitoring to spot risks coming so you have time to respond proactively. Note that setting up process measures through risk management is a very good way of ensuring that the things you are measuring are the right things and will lead to actions.

The opposite of risks are opportunities, and many risk management techniques can also be used for opportunity management. 

Risk management is also called Business Risk Management (BRM), particularly when it pays attention to strategic risks.

See also:

Risk Exposure, Risk Reduction Leverage, Risk Matrix, PDPC, FMEA, FMECA, Contingency Planning, Business Impact Analysis (BIA)

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