Risk Management is a common term in the corporate and non-corporate world currently. You must have heard about it numerous times or have read multiple news, articles on how is it becoming so important and why every other organization is focusing on this particular aspect to run their company. Let’s find out all about it in the following article.
Purnima Singh, who recently finished the Global Risk Management Institute’s (GRMI) post-graduate diploma in risk management (PGDRM) course, shines some light on the topic ‘what is risk management and why is it important’.Before pursuing a risk management career,Purnima completed her B.Com from the SPB college of commerce, she worked as a Junior Accountant at Shailees Export,before pursuing a risk management course and is currently placed inEY Business consulting Risk. According to Shubham PGDRM is one of India’s best job-oriented courses.
By Purnima Singh
PGDRM Batch Jan’21-22
It is humanly impossible to rule out risk from anything we do as it is an inherent part of our existence. On a daily basis, each one ofus manage risks. Within the last few years, we have seen the attacks of 9/11, Global financial crisis, now it’sthe pandemic. Extraordinary events have become a norm. If not for effective risk management our personal and professional performance along with our objectives would be at stake.
So let’s see what Risk Management entails from an organizational perspective.
Meaning of Risk Management
Any factor or event that creates uncertainty in achieving organizational objectives is “risk”. These risks can be in the form of financial uncertainty, strategic oversight, legal liabilities, IT and data-related threats, or natural disasters.Risk managementis the process of identifying, analyzing, and responding to risk factors that may hinder organizational objectives.It helps in calculating the uncertainties andalsopredicttheir impact, consequently giving organizations a basis upon which they can make decisions. It prepares the organization for the unexpected by mitigating or minimizing the impacts of risk even before it occurs by acting proactively rather than reactively.
Importance of Risk Management
No individual can predict risks accurately in this dynamic environment, but organizations need to prepare for anuncertain and volatile future.Organizations are becoming ever so cautious about learning from past mistakes. The scope of legality is increasing owing to business practices such as globalization. Consumers are becoming aware and learnedposing threat for businesses not adapting accordingly.
- Implementation of a robust risk management plan will help an organization build policies and procedures around avoiding potential threats and measures to minimize their impact if it occurs.
- It is crucialfor any business to know the nature and extent of risk it is prepared to take the level of risk it can tolerate and communicate the same to its employees at all levels of management.This enables limited control all over the organization.
- The ability to understand risks enables the organization to make confident businessdecisions.
- It protects the organization from the risk of unexpected events that can cause it a financial and reputational loss.
- Planning and developing structures to address potential threats improves the odds of becoming a successful organization.
Thus thepracticeofrisk intelligence and risk management is seen increasing in many industries.
The Global Risks Report 2021 by World Economic Forum
