Risk Management

(9 minutes of reading time)


The risk management process must be integrated into all levels and activities of an organization, including decision making. This is because risk is an intrinsic part of the company. Regardless of the differentials offered, the strength of the brand and the company's planning.

Companies must have internal controls, but they also need to keep an eye on the outside world. If something important happens in the company, it can disrupt its operations and results.

To decide the best way to deal with adversity, you need smart risk management. Therefore, in today's article we will explain what risk management is, what its objectives are and how to implement it in your company. Check out!


WHAT IS RISK MANAGEMENT?

Risk management is the process of anticipating, evaluating, and controlling risk. It is a way of thinking about uncertainty and acting to minimize the negative effects that can affect an organization or project.

It is an important part of any business strategy. It can also be seen as a discipline. It's not just measuring risk; it also involves managing the consequences of risk events and mitigating their effects on stakeholders.

Many companies use risk management software to help them manage risk. This software allows them to prioritize their risks and identify potential threats before they become unmanageable.


WHAT ARE THE DIFFERENT TYPES OF RISKS IN BUSINESS?

Risk is a business term that can be broadly defined as the potential for a loss of value or an adverse event. In other words, it's the chance for something bad to happen.

The Brazilian Institute of Corporate Governance (IBGC) classifies the risks considering the origin (internal or external to the organization) and the nature of the event. Check the ratings:


FINANCIAL

Companies can face financial risk when they don't have enough cash to sustain their operations. They may also experience this if they have a lot of debt or if their investments are not successful.

To deal with economic risks, generate customized analyzes that allow managers to have better control. This will give them a more accurate view of the company's overall financial health.


OPERATIONAL

It is the chance that a company's business will not be able to meet customer demand or expectations. This includes poor sales, production delays and quality problems that can lead to lost revenue.

Failures of operational processes can be dangerous as they cause delays and therefore lead to losses in the company. There is always a risk of further backsliding when these failures are not properly addressed.

One way to deal with this type of risk is to standardize and integrate your operating procedures.


LEGAL RISK

It is one of the most dangerous risks and encompasses all the threats that a business could face if it does not comply with all laws and regulations. It is important for organizations to know what their legal risks are and how to avoid them.

It can be defined as the possibility of facing legal action because of violating a law or regulation. And it can be reduced by following compliance guidelines and staying within industry standards. Investment in compliance programs is an example of a solution.

To avoid legal risks, companies must stay within industry standards, adhere to compliance guidelines, and follow best practices.

Following are some of the causes of legal risk:

- Infringement of intellectual property rights;
- Breach of contract;
- Privacy violation;
- Violation of consumer protection laws.


RISK COMPONENTS

Risk components are the factors that can lead to a loss of capital, a decrease in revenue or an increase in expenses. A risk usually has three components: event, consequence, and cause.


STEPS FOR RISK MANAGEMENT

As we explained earlier, it is essential that every company has a risk management plan to avoid setbacks and losses.

Risk management is usually done by the company's managers. These professionals analyze and identify the risks that are worth taking and those that are not. Risk-making decisions are controlled by the board of directors or risk committee, depending on the size of the company.

To develop an effective policy for your team, you will need to follow these steps:

- Identify the types of risks you want to manage;
- Identify sources of risk;
- Determine the potential impact of each type of risk;
- Define a strategy to mitigate each type of risk.


RISK MANAGEMENT IN TECH COMPANIES

In technology companies, in addition to the risks mentioned above, there are some others that need to be managed such as: information leakage, invasions, digital fraud, data loss due to natural disasters, industrial espionage. There is an area of administrative routines aimed at managing each type of problem, called IT risk analysis.

IT risk analysis considers any type of problem. Therefore, the company needs to do a thorough assessment of the infrastructure and be careful not to miss anything.

Here are others some specific risks for the IT area:


LACK OF AVAILABILITY

The lack of availability of a system or the information necessary for an operation at the right time can prevent the completion of fundamental business transactions. If, in internal customers, this generates frustration, imagine for the external public. This can lead to the loss of one or more customers. If the situation is repeated frequently, it is not difficult to imagine how unavailability can reduce business performance, compromise the company's image in front of the public and even make its survival in the market unfeasible.


TECHNOLOGY OBSOLENCE

Technology advances very fast and equipment obsolescence is also accelerating.

This technological advance can lead companies to lag competitors and lose competitiveness. For this, it is necessary to permanently update the IT infrastructure, which is expensive and unfeasible for many organizations.

Today, there are already some solutions for this type of problem, one can rely in cloud computing and adhere to services such as IaaS (Infrastructure as a Service), which transfers the hardware infrastructure to the cloud.


CONFIDENTIALITY

This is a subject that is in vogue due to the Data Protection Act. Most companies work with sensitive information about consumers, suppliers, employees and their own operations. A leak that exposes strategic aspects or customer data generates a series of problems, in addition to financial losses, failures related to confidentiality can create the possibility of digital fraud and cause damage to the company's image and loss of customers and business opportunities.

IT risk management is a fundamental part of a company's success, because with it, technology can be optimized and will have more mechanisms for its protection, maximizing the company's competitiveness.


REASONS WHY RISK MANAGEMENT INCREASES YOUR BUSINESS SUCCESS

Risk management is a process that helps to reduce the risk of an event happening. To succeed, companies need to have a risk management strategy in place.

Risk management is an important process for organizations that want to increase their success. This helps them stay ahead of the competition and protect their company's assets from unexpected events such as natural disasters, technology failures and financial losses. It involves identifying, assessing, and mitigating these risks before they can cause any harm.

For example, if your company were an online retailer selling merchandise globally, you would have to manage risk by knowing how your company's policies affect international trade laws.

The following are some of the reasons why risk management is important for a company:

- Avoid loss or damage to goods
- Protection against legal claims
- Maintain compliance with regulations
- Reduce operating costs
- Increase profitability


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