The risk factor can not be avoided in a human's life as it is present default in every sphere of life. Risk is an important element in a business unit. It is not very easy to cope with the risk elements. But "risk management can help you in a very effective way to reduce the frequency of risk. It is very important to manage the uncertainty involved in the business transactions, so that the employees and employers can perform their responsibilities well. The risk management can be defined in simpler words as:
You might face some disastrous circumstances that may lead to decline in your career. The products you are working on suddenly get cancelled or due to unnecessary rumors about the failure of your current industry, your future is in danger. All these symptoms are just to awake you and to remind you that you need to revise your resume which you haven't even looked after you have got your current job. No company promises you a perpetual progression in your career. One should be ready and updated always to adopt the career changes.
RISK MANAGEMENT: The process of identifying and developing strategies that can help to reduce the intensity of risk involved.
The strategies in risk management are:
Transferring the risk to some other party
Avoiding the risk
Reducing the negative effects and aspects of risk
Increasing the acceptance element to agree to the consequence of the risk
KINDS OF RISK: TRADITIONAL RISK:
The process of identifying and developing strategies that can help to reduce the intensity of risk involved.
FINACIAL RISK:
the financial risk can be easily managed by using traded financial instruments.
PROCESS OF RISK MANAGEMENT:
Identifying the risk
Work out on following points
The social scope of risk management
Stake holder's identity and objectives
The basis on which risk will be evaluated
A deep analysis of the risk involved
Once you have caught the risk involved, you can then easily apply the Risk management treatment to lessen down the quantity of risk. The following four points defines the process of risk management to be followed
Avoidance: It simply means that you should avoid those transactions and activities in which risks are involved. For example if you are planning to buy a property for the purpose of resale, then you should drop the idea due to the risk of fall down in the property rates. But avoidance can affect the profit and gains
Reduction: As the name suggests, it includes the ways that can be adopted to reduce the risk involved by taking favorable steps.
Retention: It means the acceptance given to those risks that can not be avoided and retained. If you have insured some property for avoiding the risk, in this case the premium filled by you is a kind of a risk that you have to bear.
Transfer: Insurance ids the biggest example of risk transfers. The risk is automatically transferred to the insurance company. The other example of risk transfer is the terms and conditions of the contract signed by another party that directly shift the risk on it.
If you are implementing the risk management technique for the first time, there is a possibility of less success rates. Practice and experience will automatically teach you to manage the risk precisely and effectively.
