Risk Management II – Benefits of Risk Management Program

The earlier article on Risk Management is Risk Management I – A proactive approach to resolve future root causes and their potential consequences.

Purpose of a Risk Management Plan
Risk management program helps the organization to deal with potential occurrences.  It defines the approach and attitude towards risks. This program helps in
  1. identifying what are those risks the organization is ready to accept.
  2. The plan to deal with those unacceptable risks
  3. defines the main requirements of risk mitigation plan.
 The risk Management program helps the organization in the following ways:
  • To identify risks and prepare an action plan to deal with the risk
  • To reduce occurences and impacts of risk
  • To understand significance/severity of risks
  • To promote organizational behaviors focused on risk management
  • To increase effectiveness of product and service delivery to customer
  • Create a process for who, what, when, where, how and how much.
  • Maintain information on historic issues.
  • Capitalize on historic issues to prevent future issues.
  • Bring out hidden risk knowledge, so it can be managed.

Benifits of Risk Management Program

  • Encourage proactive management
  • Be aware of the need to identify and treat risk throughout the organization
  • Improve the identification of threats
  • Comply with relevant legal and regulatory requirements and international norms
  • Improve financial reporting and governance
  • Improve stakeholder confidence and trust
  • Establish a reliable basis for decision-making and planning
  • Improve organizational controls
  • Effectively divide and use resources for risk treatment / handling
  • Improve operational effectiveness and efficiency;
  • Cost of risk management is typically less than the cost of issue management
  • Enhance health and safety performance
  • Enhance environmental protection
  • Minimize losses and improve loss prevention
  • Minimize the cost and efforts in managing incidents
  • Improve organizational learning and resilience
  • Increase the likelihood of achieving goals

The most important benefit of the risk mitigation program is that it gives the organization a future visibility. It deals with future events and not manage the current issues. The organization will be ready to face the realization of the risk. This gives a state of readiness against the potential consequences

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