All operations and everyday life is full of different uncertainty factors that lead to risks with different significances. The level of the risk is formed and estimated based on the probability of the event and the consequences it causes. A risk can be recognized or it can exist without anybody knowing about it. Preparing for a risk is commonly thought to be reasonable when it can achieve general improvement for the safety of an individual or a community. Often risk preparation is also done for financial reasons.
The uncertainty and risks found in the operation environment can be anticipated beforehand with the help of risk management. Risk management is a systematic method for recognizing and coping with everyday risks. Risk management includes many phases that are meant to recognize, estimate and decrease the effect of risks related to different situations. To quickly react to the changing risks in the operation environment it is necessary to perform risk management as a continuous process that evolves on the way and follows the changes in the operation environment.
Risk management can be divided into three phases: risk analysis, risk significance estimation and risk reduction.
For risk recognition there are different risk analyses available that allow in addition to the already recognized risks also the recognition of previously unrecognized risks. During the Risk estimation -phase the most significant risks will be defined some alternative methods for reducing the risk level if possible. The approvement, execution and follow-up of risk reduction actions is an essential part of comprehensive risk management.
Risk estimation searches for the answers to the following questions:
- What data is available?
- What is the quality of the data and how much data is there available?
- What is the probability of the unwanted event?
- What is the significance of the consequences if nothing is done?
- Should something be done?
Risk management tries to answer the following questions:
- What can be done to remove or decrease the effect of the risk?
- How effective are the different alternatives?
- How applicable are the different alternatives?
- What effects do the alternatives have?
- What is the level and the type of uncertainty?
- What is the best alternative?
From financial point of view both the risk coming true and its prevention usually costs something. Therefore risk management tries to find the proper relation between the risk prevention and letting the risks come true. Ramentor offers a solution for effective risk management with ELMAS software. Read more about ELMAS and the role of different methods as a part of risk management and risk analysis: Risk management methods.