Wed. Jan 25th, 2023

Risk Management Strategy

Managing Risk

By categorising risk, you can construct a risk management strategy to approach it. Most types of risk fall into these three categories:

  • Preventable Risks: Preventable risks stem from within the organisation and should be avoided or eliminated. For example, this could be an employee conducting illegal business or performing actions that break down the operational processes. Since there is no benefit from such risks, they should be eliminated
  • Strategy Risks: To reap benefits of business, strategic risk is inevitable. These risks come along with operating. They can be managed within a rule-based control model that aims to reduce the probability that the risk will occur. 
  • External Risks: Risks that are external are uncontrollable. These could be natural, political or economic risks. To control them, they must first be identified and a plan can be made to mitigate their negative consequences. 

Once risks have been identified, they should be categorised according to severity and likeliness of occurrence, and a mitigating action planned. See here for more detail.