What Are the Most Important Principles of Risk Management?
Every business in every industry could be at risk every day. Those risks may be of a financial or legal nature. They could be caused by natural or manmade disasters. Or, they could stem from poor strategic planning. No matter what risks your organization may face, you will need a risk management plan to help mitigate the impact of potential threats and—hopefully—prevent them before they occur. Before you make a plan, you must understand important risk management principles.
What Is Risk Management?
Risk management is the process of identifying and assessing the problems and issues that could negatively impact your organization. Once you identify and assess those risks, you can put together a plan to prevent or lessen damage in the event of an incident. A risk management plan can help you protect your business from anything that might threaten its viability. In this digital age, one of the most common threats is a cyberattack on your data systems. A hacker could infiltrate your network and lock you out of it until you pay a ransom. They could even invade your cloud computing resources and steal your data or your clients’ personal information.
With a risk management plan, you can take measurable actions to prevent threats before they occur. You can’t plan for every scenario—for instance, you can’t stop a natural disaster that could damage or weaken your security systems—but you can take steps to mitigate the effects of those disasters.
3 Most Important Principles of Risk Management
- Risk Identification: In this phase, you will identify the risks that could hurt your organization. Where do your vulnerabilities lie? Are there gaps in your security system? Are there flaws in your security protocol? Are there strict rules and guidelines for outside vendors? Or, does your business lack the funds for a proper technological overhaul? Make a list of every potential risk that could have a negative impact on your business.
- Risk Analysis: Once you have that list, assess the impact and probability of each risk. Some risks have the potential to cause more damage than others and will require more attention. Other risks may have a low chance of occurring or may only occur in the wake of another threat. Assess the impact of each potential risk to set priorities. Especially if you have limited resources, you’ll need to place cost against potential loss. Will each risk prevention tactic be worth your investment?
- Risk Control and Mitigation: Now that the risks have been identified and assessed, what can you do to prevent them or minimize their effects? What processes, policies, and protocols can you put in place to protect your organization? What contingency or emergency plans can you develop for risks that you can’t fully control, such as natural and manmade disasters?
A risk management plan is never complete. You will have to constantly monitor and identify risks to your organization and reassess them often. A threat to you today may be replaced by a greater threat tomorrow. For example, you may be worried about cyberattacks now, but if a recession hits next month, will your business be able to survive it? If not, the threat of a cyberattack isn’t as important as the very survival of your organization. You’ll also have to keep your eye out for new potential risks as they arise.
What Industries Require Risk Management Knowledge?
Knowledge of risk management is advantageous in any industry, but in some businesses its need is critical:
- Information technology
- Intelligence management and analysis
- Law enforcement
- Financial and business management
If you want to gain the skills to be a modern-day risk warrior, consider an education from NAU’s Henley-Putnam School of Strategic Security. We offer online programs in Information Technology, Intelligence Management, Nuclear Enterprise Security Studies, Criminal Justice, Terrorism and Counterterrorism Studies, and Strategic Security & Protection Management that can provide you with both analytical and practical knowledge from experts who have worked in the field.
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