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Types of Risk in Organizations

No matter the type of business, there are always risks that come along, and some are more detrimental than others. When it comes to managing risk, it’s important to know about the different kinds of risks that an organization can face.

  • Economic risk – With every passing day the economy changes as markets shift. It’s important to monitor the market and plan for economic boons and downturns.
  • Financial risk – Money is at the forefront of every organization. Financial risks can also be categorized as internal or external and include unexpected costs, employee turnover, rent increases, taxes, cash flow, and credit.
  • Operational risk – This refers to day-to-day operations and what internal, external, or combination of factors could affect those. Examples include a natural disaster, property damage, server outage, and loss of power.
  • Compliance risk – From the Occupational Safety and Health Administration (OSHA) to the Environmental Protection Agency (EPA) to state and local laws, companies face many regulations they must comply with.
  • Security risk – As more business moves online, it’s important to manage and protect personal data from hacking attempts.
  • Reputation risk – There’s always the risk that an unhappy customer or disgruntled employee can leave a bad review, or that a product fails to meet expectations. These can lead to negative press and even lawsuits and, in the end, hurt an organization’s reputation.
  • Competition risk – Competition is always a risk. Competitors may be offering better solutions for your customers, so it’s important to stay on top of their products and initiatives.
Each of these risks they fall under one of three “knowability” levels.

A known risk is a risk that has been mentioned by a stakeholder or an employee. It could have been mentioned in passing or by an industry expert and should be analyzed and documented.

An unknown risk is one that isn’t known so it is unable to be managed, such as weather or a sudden death.

An unknowable risk is a risk that no person is expected to foresee. Examples include system failures or a market crash.

Risk Management Content Library

Our risk management courses are thoughtfully crafted to cover various aspects of risk assessment, mitigation, and crisis management. Whether you're seeking to expand your understanding of risk management principles or need specialized training in crisis management, we have you covered. Our comprehensive content library provides access to up-to-date resources that cater to your specific needs.

How Poor Risk Management Can Affect Business

When risk is misunderstood, mismanaged, or ignored, there are numerous consequences that can greatly affect business operations.

Projects can become delayed. Unforeseen risks can slow projects down as workers need to analyze them and begin to develop a plan to move forward. This wastes time and could cause a decrease in the project’s overall value.

Not properly planning budgets is a large factor of poor risk management. By not accounting for and identifying probable risks, budgets can be overrun easily.

Customers and shareholders don’t want to be part of something that is seen as high risk. They’ll want information up front to ease their concerns, and information about backup plans and contingencies if things go wrong. If they aren’t given that, they could become unhappy and take their business elsewhere.

Even if you have a plan in place, there is the possibility that the employees won’t buy into it. Not following an established process or using the proper tools will result in a poorly managed situation where risk is involved.

Establishing a Risk Management Plan

The process for creating a risk management plan has a few steps.

  1. Complete a risk assessment. It’s important to identify all of the possible risks that could occur, understanding that some are unknowable. There are a few ways to complete a risk assessment – they include interviewing stakeholders and experts, brainstorming with staff, and simply making assumptions and determining if they are valid.
  2. Evaluate the consequences, impact, and probability of each risk. These factors help to give context and understanding to how bad the risks can be and how to plan for them. If there are a lot of probable risks, consider rating the likelihood that they will occur against the impact they would have to the organization.
  3. Assign responsibilities to employees for each risk. If a risk becomes an actual issue, the employee assigned to that risk is responsible for following through on any planned actions. However, make sure that all employees are aware of what to do if any risk should arise.
  4. Determine preventative strategies. A team should brainstorm strategies for response if something happens. There are four main strategies on how to respond to risk – avoid it, transfer responsibility to someone else, mitigate the risk and reduce impact, and accept the fallout.
  5. Create a contingency plan. These plans are usually put in place for the high priority, high impact risks, and cover what to do if or when these risks happen.
  6. Measure risk threshold. Risk threshold is the amount of risk a company is willing to take on. Working with stakeholders to see what gambles are worth it and which are not can aid in determining an organization’s risk threshold.
  7. Continue to monitor risks. Risk management never ceases, as there are so many unpredictable things that can happen. Risk probability can change in an instant, so a risk management plan should be constantly evolving.

Why Choose Our Risk Management Training?

  • Diverse Course Selection: Our content library offers an extensive collection of risk management courses that address different areas of concern within your organization. From crisis management training to financial risk management courses, we’ve got the lessons you need to build a resilient business.
  • Flexible Learning Options: We understand that your employees have diverse schedules and learning preferences. That’s why our risk management courses are available in various formats, including interactive online modules, videos, and downloadable resources. Learn at your own pace, anywhere, and at any time that suits you best.

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  • Continuous Updates: Risk management is an ever-evolving field, and it’s crucial to stay up to date with the latest trends and strategies. Our content library is regularly updated to reflect the most current industry practices, ensuring you have access to the most relevant information at all times.
  • Customized Learning Paths: Whether you’re an entry-level professional or a seasoned risk management expert, our courses cater to learners of all levels. With our customizable learning paths, you can design a training program that aligns with your unique goals and skill requirements.

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