Risk management involves identifying, assessing and controlling threats to a company’s capital and earnings.
Risk can originate from an assortment of places such as legal liabilities, financial uncertainty, management error and even natural disasters or accidents.
Over time, risk types have evolved with the advancement of technology and especially digitalization. Cybercrime has put added pressure on companies to protect assets due to IT security threats and data-related risks. Risk management strategies to protect assets from cybercriminals has become a top priority. This has resulted in bolstering risk management plans for identifying and controlling threats to proprietary corporate data, customers’ personally identifiable information and various intellectual properties.
Before strategies can be deployed to manage risk, a company’s specific risks need to be identified followed by a well thought out, comprehensive risk management process. There are many different strategies that a company can pursue in regard to various kinds of risk.
For example, a risk avoidance strategy is designed to deflect threats in order to avoid disruptive and often expensive consequences. Risk avoidance is usually the most expensive of all risk mitigation strategies, but it has the result of reducing the cost of downtime and recovery significantly.
An example of risk avoidance would be a company that packs up its expensive servers and ships to another location in advance of a hurricane. Or: A retailer stops the collection of personal data from customers to avoid the risk of this information being stolen by bad actors.
Another popular strategy is risk reduction. This occurs when a company adjusts aspects of a project or process by reducing its scope. In other words, risk reduction deals with mitigating potential losses. This could be something as basic as requiring workers on a construction site to wear additional protective equipment beyond what is mandated by law.
Or a car manufacturer reduces the risk of damaging model recalls with more vigorous quality assurance processes.
Want to learn more about risk management? Tonex offers Risk Management Training, a 2-day course that covers framework, methods, and practice risk management across industries through real case studies.
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