Assessing the Effectiveness of Risk Management Strategies.

Effective risk management policies safeguard business assets and add additional layers of protection for your business, but they’re only effective if they reduce risk.

Some risks are not avertable or completely reversible, like a shift in vendor prices. If so, then you can decide to settle them or pass them on to an insurer.

Best Practices

Assure Stakeholder Engagement
Risk analysis needs to involve everyone in your company. This participation from outside the box helps to identify any risks missing and make awareness of the impacts that some risks have on business objectives.

Apply a mix of qualitative and quantitative risk assessments including SWOT analysis, expert interviews and statistics to have a more complete understanding of possible threats. This is a more comprehensive measure.

Create a review schedule for revisiting risks. This helps ensure any new risks are identified and resolved, while still having solid risk management programmes. Standardised reporting templates facilitate escalation in real time and help you understand the trend of operational risk and KPIs. Furthermore, by having specialized risk management tools (such as RMIS), you get to streamline the entire process, keep it simple, reduce the complexity and also simplify data consumption and management reports – not to mention the regulatory side of things!

Avoidance

Risk avoidance is a process of avoiding risks by acting before they occur, like a company who does not store consumer data could bypass data laws but still miss out on important customer information which can help to optimize marketing efforts and drive sales.

Risk reduction is an approach that reducing risk, or reducing the likelihood of risks, for example, having secure off-site backups in order to decrease data loss due to a cyberattack.

How to choose a good risk management strategy depends upon a careful analysis of personal circumstances, risk appetites and goals. Avoidance is a wonderful strategy, but not enough avoidance will leave opportunities untapped and increase costs; and reversing risk excessively can inflict inefficiencies through overly bureaucratic or draconian regulations that hamper productivity and creativity. Finally, effective risk management involves both avoidance and reduction to enhance resilience while also building resilience against uncertainty.

Acceptance

Implementing risk acceptance best practices include assessing a company’s risk appetite and tolerance levels, cost-benefit analysis, and comparing risk acceptance parameters to the business goals.

Companies generally look at risk through both qualitative and quantitative assessment, to determine its probability and effect. This frees businesses to direct efforts toward reducing risks that most threaten financial viability, business effectiveness or reputation.

In order to minimize the risk of events, the optimal way to control the risk is through security measures, redundant system configuration or training employees so that they do not occur. Transfers of risk such as insurance may also be effective as well as mutual sharing of risk between partners or strategic alliances through partnerships or strategic alliances. Because risk mitigation is not always feasible or realistic, decision makers need to know when some level of risk needs to be tolerated, and write down the reason why they chose to tolerate a risk event.

Mitigation

Once risks are identified, businesses must find the right way to manage them. It involves considering and ranking each risk based on its probability and effect, which allows enterprises to prioritize what they can prevent and plan for when it cannot be prevented.

Risk management must address the impact of each risk in terms of performance, cost and timing. In addition, stakeholder must be consulted at each stage to achieve a broader view that encompasses everyone.

Since some risks will recur, continuous evaluations of mitigation will be required. For example, an organization has to constantly rethink costs and advantages of having more stock as a cushion against supply chain disruptions; or looking into outsourcing server management to outside providers that are better able to manage cyber threats.