Risks are inevitable, and there is no debate on them.
There is always a chance of risk, whether you run a startup or a well-established company. And the chances of risk increase with time and progress.
You cannot remove risk from your life and business, but there is one thing that you can do about it, and it is called management.
If you run a business selling rose gold liquid highlighter, there is no way you can run it smoothly, but there are techniques that help you handle the risky situation. The only thing you do is perform risk management in tough situations, and make more progress through sales.
Risk is basically the uncertainty that can arrive without knocking on your door. You cannot ask risk not to come, but you can deal with it through management.
What is risk management?
It is a process by which you identify the problem and arrange protective measures to control the issue. Risk management is a procedure by which you minimize the threats and increase the chance of growth.
Risk management helps you prevent loss in business and gives you a chance to rise and avail the opportunities that bring success. It also prepares you for uncertain events that bring loss so that you can deal with unexpected threads beforehand.
Risk management improves your cognitive skills and your decision-making ability to make better decisions in the most unexpected time. For risk management, it is essential to learn risk identification.
The risk management process starts with identification as it is the first step to take. When you can identify risk, the rest of the process gets easy.
On the other hand, if you have no idea of risk, how do you manage it. Well, it is essential to point out the risk and is done in two steps.
During the first step, you find out the root cause and its impact on the overall process or your business. When you can locate the root cause, it is time to find the extent of damage and the solution to a problem.
In these two steps, you can reach the problem and your goal to handle the problem. For risk management, different techniques are used, and some of them that you should try include
Decision tree diagram
Decision trees help you make the right decision at right time. The decision tree helps you reach the risk and its management through a proper channel.
You draw a decision tree diagram, and it includes the following steps
- Prepare a decision diagram that includes different ideas and thoughts on a particular matter. Write the cost and the reward of the decision in front of it. You can also right the outcome or damage of any decision.
- In the second step, calculate the risk percentage and its occurrence. Assign the risk on the diagram and understand the cause behind any issue.
- In step three, identify the monetary value and its cost.
- In the last step, calculate the Monetary Value and its impact by multiplying with probability.
An influence diagram is basically the summary of your decision tree. It represents the known and unknown variables and their relationship with each other.
The different influence diagram represents things like the oval shape shows uncertainty, and the diamond shape shows the required output.
Right down different objectives in their particular shape and connect them with arrows. While creating an influence diagram, consider the risk and the secondary factors that affect the performance factors.
Figure out all the risks that can cause damage at any point to get a clear picture of your first and second-order risks.
It is a type of analysis that gives you an insight into risks that can occur at any point. With the help of SWOT analysis, you can figure out all the opportunities and threats.
You can also separate your strengths from your weakness to reach the risks easily. It is an article
SWOT analysis in which you answer questions like how what, and why.
You answer all the questions in the form of a table to separate the threats from opportunities.
The fishbone diagram consists of all the causes and effects of certain decisions. The causes are written in the form of fish connected with arrows.
The process maps give you a piece of detailed information on different steps and their importance in the risk management process.
It helps you visualize the outline of the process and the accuracy of different steps in the process.
For a process map, you have to create a team that brainstorms all the information together and brings out the output.
The team also identifies the flaws and bottlenecks in the process to create a perfect process map. In the last step, you get your risk and its management both
Analyze the risk
It is a lat technique of risk management in which you calculate the impact of risk on your business or your project.
When you learn the effect, prioritize the risks according to their severity and work on their management. The risk analysis usually includes both the Qualitative and Quantitative analysis.