Question

The five steps in managing risk are: Identify, Evaluate, Develop, Implement and Monitor. Briefly explain this process using an exam to illustrate your answer.

Answer 1

The five steps of managing the risks are as follows:

1.Identify the risks-This is the first step to risk management where we have to identify or recognize the risks that have an influence on our project and its results.This step involves describing and classifying the potential risks affecting the project.

2.Evaluate the Risks-This step involves developing an understanding of the nature of the risks,its probability or the likelihood of its occurrence and the consequences of each risks. Classify them into high risks and low risks.

3.Develop actions for the risks-At this stage the plans or solutions are developed to minimize,modify the risks,creating strategies to mitigate the possible risks or minimize the risks..

4.Implementation-This step involves implementing the actions to minimize the impact of risks.

5.Monitoring-This is the step where we monitor and review our risks on a continuous basis.This involves reviewing the progress of actions to mitigate the risks,redefining the actions or strategies if needed.We also monitor and whether any new risks have evolved in the environment.

This process has been explained here with the help of product development example given below:

Suppose a organization wants to develop or launch a new product in the market it has to first identify the risks and classify into technical risk,financial risk,operational risk,etc. which will affect its product development.The risks can include complicated design of the product,raw materials or resources to develop the product not available on time,inefficient and demotivated labor and staff,product development took longer so could not enter the market in a right time the cost of product exceeded the budget,competition from the market,management incompetencies in the following the best practices, organization not able to monitor the technological development,factors which are beyond the direct control of organization e.g.some disaster in the environment and many more.

Once the risks has been classified develop an understanding of the probability of its risk occurrence and classify it as high, medium or low risks such as complicated design of product is a high risk,resources for producing the product not available is medium risk as organization can move backward in its value chain,management not following the best practices, rules and regulations is a low risk.

The third step is to develop potential solutions to minimize the risks such as taking decisions as to how to balance the resources constraints,funds ,time and quality of the product,monitoring the product development at each stage so that product development is complete on time,improving the communication with staff motivating them,anticipating the competitors moves,involve competent and experienced product development manager,etc.

At last all these actions and strategies of the organization is implemented and the monitoring of the actions taken to reduce the risks starts.Gaps are identified and strategies are further developed and revised to control the risks.