Step-by-step Approach for Optimized Risk Management
By means of a suitable safety management system, an attempt is made to identify and eliminate risks or at least minimize the consequences of such risks. To achieve this, three steps are taken in risk management: First the risks are identified, then they are evaluated and finally measures are defined to prevent or mitigate their occurrence.
The term "risks" refers to probable events that have not yet occurred and could have a negative impact on a project or company. The opposite of these are opportunities.
In order to identify and eliminate risks and their consequences in good time, risk management is divided into various subtasks:
- Identification and analysis of risks
- Quantification (in terms of number and level of risks)
- Aggregation (determination of the overall risk level of the company)
- Monitoring (to identify, evaluate and assess changes)
- Management of risks with appropriate guidelines and measures
Tip: All these tasks can be done manually. However, using a risk management software is much more convenient. It not only helps to identify potential problems, but also to define suitable actions.
In the following, the process of a risk analysis up to the definition of suitable coping measures is roughly outlined.
1. Risk identification
The risk management team's first task is to identify potential risks. Basically, this is one of the most difficult steps, as it requires objective work. Appropriate risk analysis software is able to determine risks based on basic input. If, for example, it is entered that the planned risk management is to be integrated in the area of the collection of personal data, a risk analysis software is able to output risks from a list that is exclusively related to data protection for exactly this area. Of course, almost every risk analysis software also offers the possibility to enter your own risks. The final result of the risk analysis is a list of all possible risks, the so-called risk register.
2. Evaluation of the risks
Once the risk register is established, each individual risk must be evaluated. This involves estimating the probability that the individual risks will occur at all and the extent of their impact on the company or project.
In order to better prioritize the consequences, an evaluation scale is created, which usually contains three levels of impact - low / medium / high impact.
These assessments are also made in a risk analysis software. In this way, each risk entry is given a priority for the subsequent definition of measures. All findings are entered into the risk register.
3. Determine risk management actions
In the first two steps, the risks were identified, analyzed and evaluated. In the last step, suitable evaluation strategies are determined for each entry in the risk register. It is important here that the measures as such are not determined until later. The third step involves classification into four areas:
Area 1 - Avoid risk: Here an attempt is made to prevent risks from occurring in the first place. At first glance, this may not sound feasible, but it is common practice in risk management. A short example: One of the most common risks is the failure to meet deadlines. In order to solve this problem, efficient time management can be introduced or small milestones can be set for control. This will (almost) completely eliminate the possibility of burst appointments.
Area 2 - Risk transfer: In this area, the risk is transferred to third parties, for example suppliers.
Area 3: - Reduce risk: The third area is about mitigating risks to a level that appears acceptable to the parties involved / affected.
Area 4 - Accepting risk: If the management of a risk is too time-consuming, costs too much money or the consequences resulting from it are very small, it can also be simply accepted. In practice, only small emergency measures, money reserves or the like are then planned.
Merging into one risk management file
All findings are then collected in a risk management file. Also in risk analysis software there is an accessible risk management file for each risk. Information on risk assessment, concrete actions to control the risk and the assessment of the acceptance of the residual risk are stored there. Whether a risk management file is created for each individual risk or for the entire project or company depends on the risk management manager. In very large projects or many risk management software, for example, it is typical that both are available.
At a glance: The advantages of risk analysis software
- A program allows an uncomplicated analysis and evaluation of risks.
- Companies can prepare more specifically for problems and their effects.
- Risk management files can be kept digitally.
- A risk analysis software presents all information clearly.
- Companies get an overview of the current risk situation at any time.
- In the case of audits or other controls, an overview of the risks including evaluation and measures can be compiled within seconds and printed out if required.
- You save a lot of paperwork and searching.
Voluntary and mandatory guidelines for risk management
Good risk management should be managed according to certain guidelines. Whether these are voluntary or mandatory depends on the company's framework conditions. There are industries where guidelines may be mandatory (e.g. health care). As part of the certification audit, the competent body may impose guidelines that must be met. And companies can also voluntarily impose guidelines for their risk management. It is therefore important to regularly inform yourself about the standards and guidelines for your own industry.
With the help of risk management software, it is now easy to integrate sound risk management into all companies. Risks exist in all situations, whether in everyday business, in projects or in dealing with data protection. For this reason, the use of a risk management software is recommended for solo self-employed persons as well as large companies. On the one hand, this ensures a high quality. On the other hand costs for (unfortunately not recognized in time) problems and disasters are saved.