Risk management is something that every organization has to master. That’s why there are many Tools of Risk Management which provide the necessary help and guide to managing risk both as an organization and also in our personal lives. Below we are going to discuss some commonly used and widely acclaimed risk management tools.
Tools of Risk Management: Inventorying
Taking inventory is something that most people are already very familiar with. Inventorying is a great risk management tool because it creates a solid foundation for any other risk management activity that would take place. Taking stock of what resources you have, such as time, manpower, financial resources, and even physical inventory lets you identify areas of vulnerability and areas of strength. Inventorying involves but is not limited to taking stock of assets, finances, time, manpower etc. There are tools that make the process of inventorying a lot easy and straightforward. These tools help automate the process.
Risk Tracking involves taking count and tracking possible areas of risk occurring, and paying close attention to those areas. It is a proactive way of preventing errors from occurring. Risk tracking can be seen as an advanced and more detailed form of inventorying and there are tools both free and paid that can help with risk tracking. SimpleRisk is a good risk-tracking tool with useful features that make risk tracking a more efficient exercise.
Threat analysis is the process of analyzing existing and future possible threats and their impacts on an organization. Practical Threat Analysis (PTA) is a threat analysis tool that helps organizations and its just one of the tools out there. There are much more threat analysis tools, many of which are highly technical and offer more diverse options and customization to get you started on your threat analysis in your organization or small business.
Vulnerability information is the process of scanning an entire system to locate and identify possible areas of vulnerability or breach.It helps determine what technical vulnerability exist. This is a great risk management strategy because it points out areas of weakness and vulnerability that are perhaps invisible to the naked eye and can not be detected by more basic and general risk management tools.
An undeniable step in risk management is risk monitoring. Risk monitoring tools provide the function of always being on a lookout for possible risky situations and help stair the organization toward more risk-averse paths. You can have a risk management process without risk monitoring. It is more of the ongoing daily risk activity that helps keep an organization risk free. There are tools that function by consolidating multiple process control systems into a framework so process owners can constantly monitor and report key output, input and process metrics that more accurately reflect the enterprise’s performance.
Risk assessment is the process of evaluating and accessing events for potential areas of risk. It also means evaluating both and a new strategy, operational objectives, and long and short term goals for an organization for possible areas of risk. Risk assessment can be both a qualitative and quantitative process and both approaches can be used simultaneously even though historically a qualitative approach has been more popular.
After risk has been properly assessed, the next step is to respond to any risk areas identified and this is called risk response. Risk response involved making decisions to either avoid the risk by starting the organization down a different path using a different (or adjusted strategy)nor facing the risk head on and attempting to tackle it. This decision usually depends on the risk tolerance of the organization and also the magnitude of the risk. The organization would try to at all times stay away from risky situation while organizations who love to embrace risk (and are also usually more innovative) would prefer to go down the rocky path and tackle it instead.
Risk Control Activities
Risk control activities involve improving existing processes and creating a new process to better handle the risk situations of the organization. WHne processes are improved it is expected that potential risk levels would be decreased. Control activities make sure that output is constantly monitored to ensure that processes remain optimal. Some control activities include policies and procedures, activity management, data integrity, and information processing. All these ensure leadership’s risk responses are performed with minimal variation and reported accurately.
Risk control activities are carried out in a process control system which usually has all the tools and information needed to monitor the performance of existing processes. When a new process is established, employees are educated on the new processes and changes made. After a while, performance metrics are collected to measure the performance of the organization after the introduction of the new processes. Control activities can also be carried out using statistical tools. These statistical tools help to carry out evaluation and control activities in a risk assessment setting. For example, control charts provide comparative analysis and real-time values of monitoring going on.
Communication and Information
Risk management cannot be complete without proper communication and information flow. With proper risk management tools and process management systems, communication can be carried out seamlessly leading to a properly functioning risk management plan or strategy. Team members have to be able to communicate effectively in order to function properly. Simple tools, such as balanced scorecards or risk dashboards, can be used to communicate a clear and concise message to all team members.