Risk Management Essay

2497 words - 10 pages

Introduction of Risk Management

Risk management is a culture which involved of the cooperation of all individual in the organization or group. The main achievement of risk management is not to discuss how the risk can be managed or prepare, but, more important, is to understand why the risks need to be managed and why it is so important. There are many techniques, tools, guidelines or processes to assist risk managers to manage risks. However, the main job of a risk manager and most efficient way to manage risk is to educate, to influence teammates in the organization to understand the definition, meaning and background of risk and how risk can change their company, their career and even ...view middle of the document...

In risk management, possibly predicted outcomes are categorized as favorable or unfavorable. Risk management is the art and science of planning, identifying, analyzing, handling, and monitoring all those predicted risk events to ensure outcomes are constructive. A good risk management process is proactive and basically different from the normal problem solving process, which is mostly reactive.

Risk management is an important process that can be applied to every part of the projects. Nowadays, in the trends of downsizing, shrinking budgets, rapid technological development, and limited schedule time, risk management become more important. It can provide significant foresights to help realizing risks for the key projects, alerting the organization to analysis the potential risks. Furthermore, it also helps developing, implementing, and monitoring plans to deal with the issues far earlier before the issues actually occur and negatively influence project cost, performance, and schedule.

Definition of Risk

To understand what risk management is or how to manage risk, we should first understand what risk is. Risks are something happen in chance and which could be impact on the normal objectives. It can be an event or a process whenever it happens in which wasn’t expected. It is usually something happens due to careless or unaware. Risks sometimes can be predicted or estimated by their likelihood or frequency. However, there are risks that it happens and it couldn’t be predicted which can be called uncertainty.

Uncertainty is a distribution of outcome which is unpredictable with sufficient research in a precise system. For example, the Large Hadron Collider experiment in between France and Switzerland involves of the most advance technology and precise calculation in the world, however, the result of the experiment is still unknown. The result of this experiment is an uncertainty that could not be estimated accurately even it is well prepared. It could be possible to estimate the probability of uncertainty or the impact of uncertainty but nobody can ensure the exact outcome. And in some cases, people just ignore the importance or impact of those uncertainties due to insufficient knowledge.

False confidence could be one of the reasons that cause the ignorance. In some cases, the communication between the lower level and the management level of the organization could influence the level of confident. Different people from different field or profession could have different values and aspects and misunderstanding between the organization departments occurs because the lack of communication. People tend to guess or estimate the other’s consideration and opinion instead of asking for more information or face-to-face discuss. All these reason can cause false confidence. And sometimes risks become difficult to be predicted or prepared because of the insufficient information or knowledge at the decision making level in the organization. Poor...

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