Responding effectively to risk
Responding to risks effectively is important to prevent the losses that could occur. People and organizations should respond to risks appropriately if they want to achieve their business and strategic objectives. Individuals and organizations experience risks on a day to day basis. I have learned various ways of responding to risks effectively and what I should do to prevent them from happening. I have also learned the fact that some of the risks cannot be prevented because they are caused by forces that are beyond human control.
According to the knowledge gained in the course, it is important to understand the risks that we are exposed to for us to respond to them effectively. Risk identification is important because it enables people to understand the measures that should be put in place to deal with the problem. The risk identification process has to start with planning. It is important to include the risk identification process in the risk management process. I have understood that several types of risks are affecting the businesses in the market. It is important to understand the types of risks that are supposed to be considered in the risk management programs in the organization.
Risk assessment is an important step in risk management. The risks that are likely to occur will be given more attention because they may cause losses. The risks that are likely to cause a bigger loss will also be prioritized to ensure that their occurrence does not cause losses in the organization. It is important to use the available information such as the key risk assessment to ensure that there is objectivity in the risk management process.
The lessons that we have had in class have also taught us about the methods and ways that we are supposed to use to respond to the risks. I have learned that a response to the risks should be in response to the loss frequency and impact. The management actions that have been taken are supposed to be directed towards reducing the likelihood of reducing the impact of the risk on an individual or an organization. The common responses to risks that we have learned in the course include avoiding, accepting, or retaining, reducing, and transferring the risk. Avoiding involves coming up with measures that will help in preventing the risks from happening. It will involve putting rules in place that will help in preventing the risks from happening and making sure that the factors that are likely to cause the risks are dealt with accordingly. In the case where the risks cannot be avoided, it is inevitable to accept the risks and monitor them effectively to prevent more losses that could come as a result. It is also important for the institutions to put measures in place that will help in the reduction in the impact of the losses.
We have also learned the fact that the best way to deal with most risks is by transferring them to the insurance companies. Individuals and companies subscribe to insurance policies from insurance companies. The insurance policy covers the individuals and organizations from losses in the case where the loss occurs. For instance, a firm may be insured against fire. Such a company will receive compensation in cash in case a fire breaks out, causing losses to the organization. In the case of an accident that causes a fire that causes losses to the organization, the insurance company will send their employees to assess the risk. They will then come up with a value that they will pay.