Misconceptions Of Risk Management
Where “Risk Management” is concerned, the first thing that is often examined is the tools for risk assessment. Generally speaking, the tools for risk assessment are vital. However, they are only a small portion of the process of risk management. The content that resides behind the tools is the essential aspect.
Companies would generally utilize risk assessment tools for the identification of threats that are known. This raises the question of how would unknown threats or anonymous threats be discovered?
Something that needs to be understood by companies is that risk assessment tools are not what helps identify the unknown hazards, but it is the risk management process that does this. The risk assessment tools are fixed points in the process that allow the assessment of the risk. However, the management of risk involves multiple different operations. The process requires a look at the content of the operation which would allow the company to adjust their risk levels and make necessary changes to help guide the company in ways which would help with encountering new threats.
It is crucial to comprehend that, when it comes to the assessment of risk, there are some limitations, since people aren’t as good as they think they are when assessing risk. This could be due to the following reasons:
- Perception is limited when it comes to people.
People aren’t created to anticipate events that are unexpected which means that people cannot perceive events.
- Limited ability to record information.
When people have an encounter with threats, the ability to record said events is flawed. People aren’t created for recording all events as machines. And even when certain events have been recorded, people would have a different perception of the reality of the situation.
- Seeking patterns.
People find themselves searching for patterns in places where there are none, and it becomes a subjective act.
- Basic understanding.
People generally have a basic understanding of things and insert their own opinions into a situation to build a conclusion.
- People would find themselves following group mentality.
Thinking in groups would cause people to follow a similar state of mind on a situation which leads them to believe that a particular decision is what’s right, without practical skill and structure for the process.
- Without the process of proper structure and practicality, using risk assessment alone would generally lead to more subjective errors in the process of risk recording.
- It should be understood that assessment of risk is incredibly difficult and hard to predict, even experts in this particular field would find it difficult to comprehend and hit the nail on the head.
It is vital for people to understand that when it comes to risk assessment, limitations exist. However, for Risk Management, the process of risk assessment is a necessity and vice versa. The key to establishing proper risk management is managing a process which can be systematically developed to come to a right conclusion. Through this, effectiveness can be maximized, and subjectivity can be eliminated. Multiple management operations in an organization including risk management can be performed using programmed software solutions in today’s business world, and it has proven to increase organizational efficiency.
Harrington Group International is a company that offers business software solutions to companies, globally. Through the use of our software products, company efficiency can be assured. HGI software provides the ability to establish systematically processed procedures to manage business activities for optimal performance.