Step 5: Treating Risks
There are several methods of treating risks, namely avoidance, accepting, reduction and transfer of risks (Bowden et. al, 2001). Read the previous four steps Purpose of Risk Management Within an Organisation
1.
Avoiding risks. In my organization, avoiding such risks would involve
possibly not importing highly flammable products such as liquor or
diesel (which are part of the consideration for new products) as part of
sales and speculating in foreign exchange fluctuations.
2. Accepting risks. Certain risks may be unavoidable. In my
organisation’s case, we have huge sales transactions in Myanmar, which
has just experience a major military and governmental coup. Hence sales
in Myanmar may be volatile. These are potential risks, which are already
factored in our business considerations.
3. Reducing risks. Currency fluctuations are imminent when trading
with overseas counterparts for my organization. Hence LCs and hedging
are done frequently in order to mitigate such risks for products
purchased and sold to other countries.
4. Transfer risks. For my organization, this is done in terms of
insurance coverage for stocks, which are housed in our premises.
Some other popular treatment of risks will include audit compliance programs, contractual obligations and conditions, preventive maintenance, quality assurance and contingency planning (Bowden et. al, 2001). Such treatments of risk are also maintained within my organization.
The different options for treatment of risks should be evaluated and risk treatment plans should be planned and prepared (Bowden et. al, 2001). Such a plan should consider detailed base implementations, risk assessment in terms of threats and opportunities in terms of priorities and recommended proactive and reactive contingency plans. (Bowden et. al, 2001).
The risk treatment schedule and action plan should include the following:
1.
The different duties and responsibilities for implementation of plan.
Preferably, the plan should involve a project leader and different
members in charge of one aspect of the project reporting to the leader.
2. The resources to be utilized.
3. Work breakdown structure for the activities
4. Budget allocation
5. Schedule for implementation
6. Details of the mechanism and frequency for proper compliance to the treatment schedule (Bowden et. al, 2001).
Step 6: Communicating and Consulting
For this stage, stakeholders need to have a common understanding of the project or product situation. Consultation from stakeholders as well as experts is required for better opinions, with communication needed for better coordination (Bowden et. al, 2001).
Such an approach is required for several reasons:
1. To prove that the process is conducted in a systematic manner.
2. To provide records of risks and proper organizational records.
3. To provide relevant decision makers with a proper risk management and action plan for approval and implementation.
4. To provide accountability.
5. To facilitate further monitoring and review.
6. To provide audit trail.
7. To share information (Bowden et. al, 2001).
This report should include the following:
1. Executive summary
2. Scope of project
3. Methodology of study
4. Contextual issues of the project including the restraints
5. Success factors chosen
6. KPIs for each success factor chosen
7. Target and tolerance
8. Any assumptions
9. Top ten risks across all CSFs for the project or product plan
10. Vulnerabilities in phases of the project
11. Responsibilities for managing risks in phases
12. Primary and secondary drivers triggering each risk
13. Existing controls
14. Tables and figures (Bowden et. al, 2001)
Step 7: Monitoring and Reviewing
For the final step, there is a need to develop and apply mechanisms to ensure ongoing review of risks i.e. project leaders should provide a consistent update of the current situations (Bowden et. al, 2001). The effectiveness of the risk management process should be consistently monitored and reviewed (Bowden et. al, 2001).
Purpose of Risk Management Within an Organisation Conclusion
Risk should be managed on an active basis. Risk management will involve identification of areas of high risks ahead of time, interpreted to the greatest degree possible, with the best technical or marketing talent allocated to the problem, have the problems solved as quickly as possible, and be provided with a contingency plan in case something cannot be resolved (Smith and Reinertsen, year unknown).
Reference List
Bowden, A., Lane, M. and Martin, J. (2001) Triple Bottom Line Risk Management. Wiley.
Cooper. (year unknown). New Products: Problems and Pitfalls. Pg 22-49.
Cooper. (year unknown). To test or Not to Test. Pg 123-129.
Smith, P. and Reinertsen, D. (year unknown). Managing Risk. Pg 207-21.
Vlahos, K. (2001). Tooling up for Risky Decisions. Pg 47-52.
Article Source: http://EzineArticles.com/1507288