Types of Risks in Business
Risk Management is one of the most important and effective elements of the marketing process in business. Risk is omnipresent in each and every business irrespective of its stature and size. Thus the management of business organizations generally implements a risk management system that can help them to identify, assess and control threats that can hamper the earnings of the organization (Dang, Jasovska & Rammal, 2020). As said earlier, risks can be of various types like that of financial risks, legal risks, risks involving technological issues, strategic management issues as well as different form of unprecedented accidents. The presence of an effective risk management program enables the business to get a proper idea of the nature and capability of the risks and also identify the impact it can make in the organization. Such a process can help the business to develop appropriate shield against such risks. Compared to traditional times, modern day business industry is much more vulnerable to different risks considering the changes and complexity involved in the process. The report here presents a clear idea on the development of risk management processes that includes the likes of risk control and risk mitigation along with their application in the business enterprises. Discussion of these risks presents the opportunity to develop the idea regarding risk management in a professional manner.
It is well known that running a business organization means facing a large number of different risks that needs to be identified properly. The presence of different risks can hamper the smooth operations of the business making it tough to build a sustainable model (Wijaya, 2021). Thus it is important for the management of the business organizations to develop a proper risk management process that can anticipate and control the risks involved. The very first task that needs to be done by the management includes the development of a probability scale for the risks involved in order to gain idea on the purpose of the risk assessment. This includes;
- Likelihood of risk occurrence
- Chance of risk occurrence
- Small chance of risk occurrence
- Very little chance of risk occurrence
All the above mentioned probability scales helps the management to get a clear idea on the risk and its impact on the business operations (Polinkevych et al. 2021). Thus risk can be controlled by means of such probability scorecards and also by development of statistical analysis that can present a quantitative idea of the risks. Another major way to get a control over the risks involved in the business process, is insurance. Insuring the assets against any form of risks can help the organization to manage a sustainable business model that is important for success. For example insurance against any fire or liability insurance can help develop success in the most efficient and organized manner. Insurance against computerized data can be done through the maintenance of a proper backup. Implementation of these risk control procedures can be important for success in the most effective and organized manner.
Risk mitigation can be defined as the ways by which the business takes a proper action to reduce the impact of the risks. It is generally done through limiting the exposure of the business to different risks. Some of the major ways by which an organization can mitigate risks in the business are as follows;
- Risk Avoidance- The management of business organizations need to develop effective strategies in order to avoid risks that can hamper the operations of the business. The management of the business organizations need to limit the business within accepted levels and needs to reduce the risk process efficiently. Such a process can ensure non-participation in high end tasks.
- Risk Acceptance- Acceptance of risks is another form of risk mitigation process. Such a process can help to accept the omnipresent risks in a business and accordingly plan strategies. These strategies can help to tackle the business processes in the most appropriate manner. Such a process is mostly applicable in the investment arena.
- Risk reduction or control- Reduction of risks is one of the major areas that can help mitigate the common issues (Panjehfouladgaran & Lim, 2020). Development of a probability scale and taking appropriate steps earlier to ensure non-occurrence of risks can prove to be be effective in risk mitigation. Insuring the assets against any form of risks can help the organization to manage a sustainable business model that is important for success against any form of risks.
- Transfer of risks- Risk transfer involves handing over the responsibilities of a particular asset over the other in order to get relieve from any form of risks involved in maintaining the asset. Such a process helps to reduce the amount of risk and allows the business to develop in a sustainable manner.
- Proper monitoring of risks- Monitoring of risks involved is certainly a crucial part of the business process. Such a process can help develop success in the most effective process. Monitoring the risks effectively is important for success as it can identify the impact of the risks and the damage it can cause (Lyu et al., 2018). Such a process thus helps to address the issues and develop success efficiently.
It is important for the management of the business organizations to implement the risk management strategy in the business in order to develop a successful and sustainable business model (Hom et al., 2020). The identification of the risk process is not only appropriate to ensure safety from risks. It is important for the management of the business organization to develop appropriate measures that can process the risk management model in the business structure. Risk control measures can be implemented in the business by means of applying some effective steps that includes;
- Prioritization of risks involved considering the impact and capability of the risks to inflict damage to the business
- Buying insurance for the assets of the business. Insuring the assets against any form of risks can help the organization to manage a sustainable business model that is important for success. For example insurance against any fire or liability insurance can help develop success in the most efficient and organized manner.
- Limitation of different forms of liability is important for success.
- Implementation of quality is also important for success. The management of the business organization can develop quality assurance programs to ensure a high quality business process that can be important for success.
- Limitation of high risk customers is also equally important in these regards
- Appointment of a risk management team can be also helpful for success
Conclusion
The report presents a professional idea regarding risk and the different ways to control and mitigate them. Discussion of these risks presents the opportunity to develop a clear thought regarding the issues faced by the management of business enterprises and the ways they handle them. It is well known that running a business organization means facing a large number of different risks that needs to be identified properly. The presence of different risks can hamper the smooth operations of the business making it tough to build a sustainable model. Thus application of the business risk mitigation model through identification of the priority of the risk and monitoring them regularly can be important for keeping different risks related to business at bay. The report clearly establishes the importance of risk control and mitigation process. It is important for each and every organizations to develop proper risk management programs in order to ensure a sustainable business model for the future.
References and Bibliography
Dang, Q. T., Jasovska, P., & Rammal, H. G. (2020). International business-government relations: The risk management strategies of MNEs in emerging economies. Journal of World Business, 55(1), 101042.
Hom, J., Anong, B., Rii, K. B., Choi, L. K., & Zelina, K. (2020). The Octave Allegro Method in Risk Management Assessment of Educational Institutions. Aptisi Transactions on Technopreneurship (ATT), 2(2), 167-179.
Lyu, B., Lee, K., Kim, T., Cho, H., & Moon, I. (2018). Damage reduction strategies against chemical accidents by using a mitigation barrier in Korean chemical risk management. Safety science, 110, 29-36.
Panjehfouladgaran, H., & Lim, S. F. W. (2020). Reverse logistics risk management: identification, clustering and risk mitigation strategies. Management Decision.
Pieket Weeserik, B., & Spruit, M. (2018). Improving operational risk management using business performance management technologies. Sustainability, 10(3), 640.
Polinkevych, O., Khovrak, I., Trynchuk, V., Klapkiv, Y., & Volynets, I. (2021). Business risk management in times of crises and pandemics. Montenegrin Journal of Economics, 17(3), 99-110.
Rehman, A. U., & Anwar, M. (2019). Mediating role of enterprise risk management practices between business strategy and SME performance. Small Enterprise Research, 26(2), 207-227.
Stergiopoulos, G., Dedousis, P., & Gritzalis, D. (2020). Automatic network restructuring and risk mitigation through business process asset dependency analysis. Computers & Security, 96, 101869.
Suroso, J. S., & Fakhrozi, M. A. (2018). Assessment of information system risk management with octave allegro at education institution. Procedia Computer Science, 135, 202-213.
Wijaya, O. Y. A. (2021). Risk Management Mitigation in the New Normal Era. Budapest International Research and Critics Institute-Journal (BIRCI-Journal) Vol, 4(1), 1088-1097.
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