Risk management

139This is the ability to minimise problems and manage them when they arise.

We discussed Crisis and risk management business tools in previous lessons.

Although the module focused on the risks to companies from external threats such as terrorism, in the wider sense all risks should be considered by managers, including risks from competitors, poor sales, or from unplanned events in the workplace such as accidents. Managers should be alive to the potential of any risk, and be ready to take fast action in the event of a problem arising. Preventative action is always better than a cure, so a significant part of a manager’s role is to spot problems as they begin to occur and remedy them quickly.



Decision making

We discussed decision making business tools n previous lessons.

Decision making involves choosing between alternative courses of action, sometimes to solve problems, in other circumstances to develop or implement a strategy.

Decision making in business takes many forms. Decisions can be made individually, or in teams, or by groups, or sometimes they are made by the companies’ Boards. Some are made by general agreement, or there may be a formal vote in certain circumstances.

The process essentially involves the following steps;-

  • Define the problem
  • List possible solutions and their outcomes
  • Set a time scale, and decide who is responsible for the decision making
  • Gather and assess accurate and up to date information
  • Assess the potential outcomes and risks of the various possible solutions
  • Compare the advantages and disadvantages of each solution
  • Make the decision. If possible allow a little time for reflection before announcement /implementation
  • Review and analyse the outcome at an appropriate later stage.

There are a variety of decision making and problem solving techniques and tools used by managers and executives to help the process .In particular, complex business decisions are often not made by one person. They will consult with other members of their team, or board, or even use outside consultants. They will analyse and discuss the issue, and may use techniques such as brainstorming, or arrange workshops to study the issue.

Brainstorming

Brainstorming is a process involving a group of people thinking about a clearly defined problem in a relaxed forum .The brief should clearly define the problem, but not restrict the free, open nature of the meeting .The process can produce innovative and original, radical ideas, and it is a good way to involve the entire team. It combines a laid back problem solving approach with lateral thinking. It is different from traditional analytical thought processes which can restrict people’s imagination with judgements or assumptions because there are no restrictions and no preconceptions .Everything is possible!

Everyone is asked to abandon their normal ways of thinking, contribute ideas, saying anything they think of without appraisal or interpretation. Ideas need not be fully thought through proposals. There is no evaluation, opinion or appraisal of proposals. The idea is to liberate unconscious thoughts which may themselves generate more suggestions from others. Pausing to evaluate proposals at this point may restrict the flow of ideas.

SWOT and PEST analysis

These are two of the most commonly used tools

SWOT analysis is an acronym for
Strengths
Weaknesses
Opportunities
Threats

SWOT analysis considers internal factors so is often used to analyse a business unit, or a proposal or competitor analysis.

PEST analysis is an acronym for
Political
Economic
Social
Technological

This considers external factors so is often used to analyse market potential, as it takes into account factors like market attractiveness, growth or decline, product and business, potential for business.

Comments

Risk management — 84 Comments

  1. Always grateful for the continued help in making us better in the things we do, to fast track our capability in these crucial areas.

  2. SWOT analysis and PEST” analysis, are the key measure for risk management.

  3. A good Food for thought/brainstorming, leads solution of multiple well defined issues. Appreciated.

  4. These lessons are really very interesting and much of a help.I enjoyed reading them.

  5. Thanks.
    Thanks.
    To “PEST” analysis, we can add two elements and becomes PESTEL, which is an acronym of:
    Political
    Economic
    Social
    Technological
    Environmental
    Legal

  6. I acknowledge something more . Thanks for feeding with this lesson

  7. Good Lesson just continue your feeding us.Thank you soomuch