“Risk management process refers to the process of measuring or assessing risk and then developing Strategies to manage risk. In the risk management, the following steps are taken up to minimize the risk”- Discuss the steps which are taken to minimize the risk.
Risk management process refers to the process of measuring or assessing risk and then developing strategies to manage risk. In the risk management, the following steps are taken up to minimize the risk:
Step 1: Risk Identification and Assessment This step involves event identification and data collection process. The institution has to put in place a system of capturing information either through key risk drivers (KRIs) or through a rating system. Once risks are identified, combine like risks according to the following key areas impacted by the risks — people, mission, physical assets, financial assets, and customer/stakeholder trust.
Step 2: Risk Quantification and Measurement The next step is to Quantify and Measure risks. This means risks according to probability and impact. Various standard tools are used by financial institutions to measure risk and understand their impact in terms of capital or its importance to the organization through a scoring technique.
Step 3: Risk Analysis, Monitor and Reporting The next step is risk analysis, monitoring and reporting. This will help one to get the big picture and decided on the approach to risk management.
Step 4: Capital Allocation Risk Analysis, Monitoring & Reporting sends information to the top management of the organization to take strategic decisions. Capital allocation plays key role in management decision making.
Step 5: Risk Management and Mitigation After the above step, the last step is to make strategic decisions to manage the risk in order to mitigate the risk.
Risk management process refers to the process of measuring or assessing risk and then developing strategies to manage risk. In the risk management, the following steps are taken up to minimize the risk:
Step 1: Risk Identification and Assessment This step involves event identification and data collection process. The institution has to put in place a system of capturing information either through key risk drivers (KRIs) or through a rating system. Once risks are identified, combine like risks according to the following key areas impacted by the risks — people, mission, physical assets, financial assets, and customer/stakeholder trust.
Step 2: Risk Quantification and Measurement The next step is to Quantify and Measure risks. This means risks according to probability and impact. Various standard tools are used by financial institutions to measure risk and understand their impact in terms of capital or its importance to the organization through a scoring technique.
Step 3: Risk Analysis, Monitor and Reporting The next step is risk analysis, monitoring and reporting. This will help one to get the big picture and decided on the approach to risk management.
Step 4: Capital Allocation Risk Analysis, Monitoring & Reporting sends information to the top management of the organization to take strategic decisions. Capital allocation plays key role in management decision making.
Step 5: Risk Management and Mitigation After the above step, the last step is to make strategic decisions to manage the risk in order to mitigate the risk.
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