Risk management as a management system

More and more often recently in the news and in thematic articles you can find the concept of risk management. And now many experts are talking about risk management as a separate management system.

Instruction manual

1

Every organization, whether it is a small company with five employees or a huge international corporation, faces risks. Of course, the risks that it faces depend on the size of the company. To understand risk management as a management system, it is important to determine the goals of the company.

2

The most common goal of a company is to make a profit. However, it is worth noting that this goal hides deeper tasks, namely, the development of the company, stable operation, expansion, etc. Upon receiving sufficient profit, even a small company gradually invests the funds received for further development. And in this regard, the prevention of risks and the ability to manage them becomes an important task for any company.

3

Risk management is aimed at organizing work to reduce the degree of risk in an uncertain economic situation. This is a whole system of risk management, as well as various types of relations: economic, financial, legal, etc. Risk management includes both strategy and management tactics.

4

If we consider risk management as a management system, then we can distinguish two subsystems in it: an object and a subject of management. The management object is understood as risk itself, as well as risky investments of capital, as well as economic relations between business entities. Examples of such relationships include relationships between business partners, competitors, the customer and the supplier, etc. The subject of management is understood as a special group of people that implements the functioning of the object.

5

Through risk management, it is possible to determine future deviations from the calculated results, after which they can be managed. However, for competent risk management, a clear distribution of responsibility is necessary both among senior management, and at all levels. Senior management at the same time should act as the initiator of the implementation of the risk management system and the control body. The decisions taken must not contradict the laws, international acts and internal documents of the company.

6

Currently there are several standards for risk management in different countries of the world. These include: “Risk Management Standard” of the Federation of European Risk Managers Associations, “Australia and New Zealand Risk Management Standard”, “UK Risk Management Code of Practice, ISO 31000: 2009“ Risk Management. Principles and Guidelines ”of the International Organization for standardization (ISO).