Due to occurrences of a phone’s (Galaxy Note 7) battery burning and exploding, which caused massive financial losses and harmed the company’s image, Samsung faced one of the most critical problems in its history in 2016.
Nonetheless, thanks to the risk management process, Samsung was able to overcome this setback by withdrawing all (Note 7) phones and offering the option of replacing them, as well as accelerating the production of various versions of its phones to demonstrate its ability to continue creating, and launching the (Galaxy S7) phone to overcome the defects of the previous version.
Samsung was able to reclaim its global leadership position as a result of the risk management procedures contained in the risk management strategy. As a result, risk management becomes an important requirement to foresee anything that might affect corporate performance and investment. In the next essay, we will go through this powerful method that entrepreneurs must apply.
The concept of the risk management process
Risk management refers to all of the activities involved in controlling the hazards that businesses and entrepreneurs may encounter. This strategy would decrease losses while increasing the likelihood of success. And when we talk about risks, we mean everything that threatens or constitutes a hazard to the work process, whether at the present or in the future.
Mistakes and setbacks in money and business are conceivable at any time, just as they are in other areas of life. These hazards can be imminent, unforeseen, or anticipated, and human blunders or the advent of extremely devastating events, such as the Corona epidemic, can devastate all planning.
The emergence of these risks involves dealing with them appropriately to minimize the amount of their impact, either via quick rapid interventions and solutions or by building plans and programs targeted at dealing with all emergencies affecting the business process. Because of its importance in dealing with and conquering crises, risk management becomes a critical process that must be mastered.
Financial risks such as a lack of cash and funding, natural catastrophe risks management and management risks, competition and pricing volatility, and electronic assaults all have varying degrees of influence depending on the size of the firm.
Risk mismanagement causes significant financial harm to businesses and individuals and is a leading cause of bankruptcies and corporate collapse. At the very least, it can result in a significant reduction in the volume of business growth, implying the possibility of more crises in the absence of a risk management process.
Given the importance of risk management, organizations and institutions’ administrative structures contain teams and offices dedicated to the job, which are overseen by the risk manager, who has become one of the most significant positions of responsibility in the corporate world.
The importance of the risk management process
In general, the risk management method aids in facing and controlling numerous difficulties before they worsen. The following are the functions that this process plays:
– Defending the future of businesses and entrepreneurs against different dangers that might jeopardize their operations.
– Increasing institutional confidence and their willingness to confront risks, improve their competitive position and provides happiness for partners, who are motivated to increase the extent of their relationship due to a safe working environment.
– Identifying the insurance requirements that can be used in the case of an extremely significant and unplanned disaster.
– Establishing specific goals that can be reached even in the presence of risks by determining future objectives with full objectivity, as thinking about prospective risks helps identify precise goals that can be accomplished even in the presence of risks.
Procedures for risk management
The risk management process is comprised of a series of methodical stages aimed at addressing a variety of difficulties, and it is mostly represented in:
01: identify the Risk.
Companies and risk management departments are attempting to determine when, where, and how hazards may influence the future of work. They must identify and understand the numerous sources of possible risks and rank them according to priority and risk level. The process of identifying risks begins with an examination of many components of the business environment, such as the economic, social, and legal conditions under which the company operates.
It is beneficial to include everyone in this process so that all members of the work team may offer proposals relating to the risks that may be encountered at work. This allows the circle of possibilities to be increased, and it also provides for improved communication within the business.
Once the risks have been identified, a database in the form of records should be built to guarantee that they are stored and referred to as needed. These data can take the form of a table that lists the different types of hazards, their sources, and the likelihood of them occurring.
02: risk analysis
After identifying the most important threats to the workplace, the next step is to analyze them. Each risk is dealt with separately and more comprehensively at this level, by defining the causes that can contribute to its occurrence, the probability of its occurrence, the degree of impact, and the extent of the risk. Some dangers may lead to a complete cessation of activity, while others have minor consequences.
03: Assessing risks and setting priorities
After identifying and analyzing the most important potential risks, the evaluation phase focuses on assessing the severity of each error. As a result, risks can be rated from high to low impact based on their assessment.
Then we go into prioritizing risk management, focusing on the areas that offer the greatest business risk. This stage helps to get a comprehensive view of the project and to identify areas of risk that require remedial if they arise.
04: risk handling
After the vision of possible dangers has become obvious, the treatment stage begins, which entails building a risk management strategy, as well as identifying solutions and ways of intervention that are appropriate for each risk. At the same time, all of the risk management department’s choices are written down and given to management for approval.
The remedies vary depending on the type of risk and its source; from there, the work team may be involved in suggesting potential solutions. As a result, risk management is more successful when all of the team’s resources are put to use, and the database grows more diversified and robust over time, especially when past risk records are meticulously prepared.
05: risk control
In all circumstances, it is impossible to identify all hazards and devise a strategy to address them. The process of monitoring and controlling risks, in this opinion, cannot be disrupted. For example, the lack of price stability in the oil market poses ongoing hazards for businesses, necessitating constant monitoring of these prices and their evolution.
The risk management strategy should be adaptable since the plans established or judgments made will never be flawless. The number of changes that the corporate sector is going through is incalculable. As a result, institutional and corporate administrative organizations must demonstrate a high level of attention and the ability to make quick choices in an emergency.
A few examples of risk management scenarios
Various facets of the corporate world are included in the risk management process. Risk management is not restricted to a company’s internal operations; it encompasses everything that enters the workplace. Let’s look at a few examples:
in the workplace
When a company decides to introduce a new product to its line of business, it first considers the risks involved. The scale of the competitors, purchasing power, and the degree of customer acceptance of the new product might all be investigated.
During the contracting process
When businesses use international contracts to minimize risks associated with local currencies, the best method may be to conclude those contracts using the US dollar as the most stable currency.
Risks to Safety
Respecting safety standards is critical to the continuation of corporate operations. Companies are eager to continuously monitor safety systems to eliminate any dangers that may create work disruptions or endanger the safety of work crews.
All businesses confront market risks such as pricing, competition, and others; one of the most significant hurdles to corporate success. From here, all institutions attempt to control risks by the nature of their operations.
Natural disasters can have an impact on the growth and prosperity of a firm. This compels businesses to investigate the degree of the influence of natural circumstances and how to cope with them, particularly in places subject to periodic climate fluctuations.
risk management enables businesses and entrepreneurs to anticipate the scale of prospective hazards and devise the most effective tactics for dealing with them. And when we talk about risk management or management, we’re referring to the policy followed by all businesses, regardless of their size. However, large businesses manage the process more professionally since the dangers that threaten them are more severe.
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