We explain what risk management is, what are the various types of risk that exist and why it is so important.
What is risk management?
It is understood by management from risks developing an approach focused on identifying and managing potential threats to an organization or project, and then establishing the strategies ideal for launch. It is considered one of the central elements of strategic management.
When we speak of "threat" in this context, we refer to any external factor that has the ability to disrupt the internal processes of a community, organization or draft, and that they require some type of containment plan to avoid them or minimize the damage they may cause, if they inevitably occur. For example, a community may be besieged by natural disasters or by the failure of human initiatives that tend to disorder, or by processes of a mixed type leading to an emergency.
Thus, there may be different types of risk:
- Market risk. Linked to the fluctuations of the commercial and financial year, such as interest rates, exchange and the relationship between the offer and the demand.
- Credit risk. When one of the parties to a financial contract may not comply with what was agreed and the money invested is lost.
- Liquidity or financing risk. When one of the parts of a contract You cannot raise enough money to honor your commitments.
- Operational risk. Or the possibility of losses due to failures in processes, personnel or technical systems employed by a business.
In this way, the purpose of risk management is none other than to identify in advance the possible risks in an organization, in order to take forecasts or even, in some cases, turn them into opportunities. Thus, business risk management (Enterprise Risk Management) aspires to design and apply to any management business a set of strategies created to "shield" the company from its main risk agents, which involves first making a diagnosis of weaknesses, strengths and opportunities.
Importance of risk management
Risk management and risk management systems, with which it is sought to channel the threats to an organization or company, are fundamental instances in the contemporary business world, since a high percentage of its success or its success is usually based on them. failure. The reason is simple: an organization better prepared to face the possible complications that its particular production process implies, is also a company that will know what to do if a trouble is presented, thus being able to prevent it from becoming a catastrophe, when failing to turn it rather into an opportunity for growth and investment.
That is why risk management is understood as a process of feedback continuous review, strategy design, application of the same and then a new diagnosis.