Risk Management Process

Risk management process

The main tasks of a risk management process are to systematically identify, assess, prioritise and mitigate risks that could affect the objectives, assets or operations of an organisation.

The risk management process should be a continuous and iterative process that aims to manage risks effectively in order to protect the organisation's assets, reputation and strategic objectives.

The process typically includes several key steps to ensure that risks are effectively managed.

1. Risk Identification
The identification of potential risks that could impact the organisation, project or process and is used to identify internal and external risks, including operational, financial, strategic, compliance and environmental risks.

2. Risk assessment and analysis

The assessment of the identified risks to understand their potential impact and probability and is used to prioritise risks according to their severity, taking into account both probability and impact. Risk assessment distinguishes between:

Qualitative risk assessment: assessing risks based on their probability and potential impact, often using a risk matrix (e.g. high, medium, low).
Quantitative risk assessment: Use numerical methods to estimate the financial impact or probability of risks (e.g. Monte Carlo simulations, decision tree analysis).

3. Risk evaluation
The comparison of the evaluated risks with risk criteria to determine their significance and decide on the necessary measures and serves to determine which.

4. Risk treatment
The development and implementation of strategies to mitigate, transfer, accept or avoid risks. This is done on the basis of plans, controls, procedures and guidelines that have been developed within the company for risk treatment.

5. Monitoring and review
The continuous monitoring and review of risks and the effectiveness of risk management strategy to ensure that the effectiveness of risk treatment and risk management practices are in line with the organisation's objectives and risk appetite.

6. Communication and reporting

Ensuring the flow of information between stakeholders about risks and the status of risk management efforts. Clear and open communication with stakeholders about risk management policies, procedures and results promotes a risk-aware culture within the organisation by educating employees about risks and their role in managing them.

7. Risk documentation

Keeping comprehensive records of risk management activities to ensure transparency and accountability by documenting identified risks, risk assessments, risk treatment decisions and the results of risk management measures. The documentation should be up to date and accessible for audits or future reference.