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The Basics of Risk Management

September 6 2010

The basics of risk management must first be known before this type of system can be understood and properly implemented in a company. This has to be a proactive type policy for it to do what it is intended to do, handle the risks associated with doing business in the best possible manner.

To begin in the basics of risk management, a plan must be laid out or procedure written that can be implemented into a company’s business plan so it can be used. In this plan has to be certain elements.

The first element in the basics of risk management is how are the risks going to be indentified and by who. The decision on who the person responsible for the identification process must be made for this process to begin before anything else can be done. This is because the approach to identification can be different for each person and so there is someone who can be held responsible for the completion of this task.

The second element of the basics of risk management should be the criteria that are used to measure the risks. This involves two different measurements that must be assessed on each risk that is identified. The first one is the probability of the identified risk coming in contact with the project or business. While there are many risks associate with business, not all of them will have an impact so this must be determined. The second part of this is how much the risk will actually impact the business or to what degree.

The third element of the basics of risk management is taking all the information that has been acquired and coming up with a list that prioritizes the risks according to impact leveled and their probability of impact itself.

With a detailed priority list completed the fourth basics of risk management can be started. This is the mitigation of the risks that will impact the business. The focus of this is to mitigate the impact of the risk totally, but this is rarely ever accomplished. So reduction of the impact is what usually occurs.

These are the basics of risk management that need to be in every procedure or policy that a business has when dealing with the risks of doing business in their specific industry.

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