Answer:
Define Risk Management Process:
Risk management is a systematic approach to identifying, assessing, and mitigating potential risks that could have an impact on an organization's objectives. It involves identifying and analyzing potential risks, evaluating their likelihood and impact, and implementing strategies to mitigate or manage those risks. The risk management process typically includes the following steps:
1. Risk Identification: This step involves identifying potential risks that could impact the organization's objectives. This can be done through various methods such as brainstorming, reviewing past experiences, and conducting risk assessments.
2. Risk Assessment: After identifying potential risks, the next step is to assess their likelihood and impact. This involves evaluating the probability of the risk occurring and the potential impact it could have on the organization.
3. Risk Prioritization: Based on the assessment of likelihood and impact, risks are prioritized to focus on the most critical ones.
4. Risk Mitigation: Once the risks are prioritized, strategies are developed to mitigate or manage them. These strategies can include risk avoidance, risk transfer, risk reduction, or risk acceptance.
5. Risk Monitoring and Review: After implementing risk mitigation strategies, the risks are monitored and reviewed regularly to ensure that they are being effectively managed.
Standard Parameters for Defining Risks:
To define risks effectively, it is important to use a set of standard parameters. These parameters provide a framework for assessing the likelihood and impact of risks and help organizations prioritize their risk management efforts. The four standard parameters for defining risks are:
1. Likelihood or Probability: This parameter assesses the chance of the risk occurring. It can be expressed as a percentage or a probability score.
2. Severity or Impact: This parameter assesses the potential impact of the risk on the organization. It can be expressed in terms of financial loss, damage to reputation, or other relevant metrics.
3. Detection Process: This parameter assesses the ability of the organization to detect the risk. It can include the time and resources required to identify the risk, as well as the level of expertise needed.
4. Mitigation Plans: This parameter assesses the effectiveness of the risk mitigation strategies. It can include the cost of the strategies, the time required to implement them, and the expected outcome.