Every year, a company goes through a goal setting process, such as determining individual objectives, creating budgets and improving processes – all aligned to usher an organization towards a desired outcome or goal.
However, one should acknowledge any obstacles that may get into the way and that hinder goal’s achievement. If you own a business, you need risk management that will discuss any threats/risks and devise a plan on how to make their impact less severe, if ever they arise.
And that is to say, discussing any risks and planning ahead to counter and minimize the effects of threats can be as important as setting the desired goal itself.
To learn more about it, let’s discuss decision-making and risk management and ways the latter can help in business development and success.
What Is Risk Management In Decision-Making?
Every decision involves risks. It can lead to a favorable or an unfavorable outcome. It is the very same reason you need a plan that identifies any potential threats and alternatives/follow-up actions.
But before delving any further, though, let’s define these two major concepts for a better understanding of the topic.
Decision-making involves making choices. While it is taken, much time is also consumed. It is not done abruptly, and after all, it also involves steps like –
- Identifying and defining the problem
- Gathering and collecting data
- Developing strategies
- Weighing options and choosing the best one
- Coming up with a plan and executing it
- Seeking alternatives and taking follow-up actions
Sometimes regarded as a check and balance system, it’s important in organizations and businesses where you or another person can make a decision that can affect the overall operations.
Decision-making can help you and your organization make a more thoughtful decision because you’re able to collect and organize relevant information and define the alternatives.
Any potential problem is carefully considered through decision-making. However, a decision is just the beginning, not the end. Along the way, you may need to tweak or change a part of or the decision itself because another issue may arise.
That is to say, decision-making is a dynamic and continuous process. But in all cases, every decision seeks accomplishing a goal, a preset objective, mission and vision.
But before reaching a goal, your organization/firm/business may face challenges or obstacles in at least one area, such as marketing, operations and administrative.
And for this very reason, you need an effective risk management plan. But what is risk management, anyway?
In the simplest terms, risk management is the process of identifying, assessing and controlling any threats to an organization.
These risks or threats can be on your capitals and earnings and from sources – legal liabilities, financial uncertainties, accidents, strategic management mistakes and natural disasters.
If you have a digitized or ecommerce business, threats can include risks on data (e.g. data breach) and security (e.g. private information or intellectual property rights theft).
So simply put, risk management can also involve strategies in order to alleviate the risks and threats that your business might be facing along the way.
That is why companies should come up with a plan to identify and control threats to their assets, such as intellectual property, customer information and proprietary corporate data.
While unique from each other, it is quite obvious that every organization and business faces a certain risk that can lead to unexpected consequences such as loss of money and at worst, permanent closure.
But with risk management, they prepare for any unexpected events through minimizing the risks that would otherwise lead to unexpected cost.
How Risk Management Directly Influences Decision-Making
Identifying potential threats and risks and implementing a thorough risk management plan, you can minimize the effects of any problem before they become worse.
In the process, you can protect your organization’s future because you anticipate any issues and devise a plan to mitigate those before they become a pain later.
With a risk management plan in place, you can also establish protocols and procedures to avoid threats and minimize their impact to your organization, if they occur, helping you deal with the results.
By understanding and controlling risks, you’ll also feel more confident about your decisions to achieve your goals.
Risk management, that is, influences decision-making because strategies attempt answering significant questions, such as –
- How will my decision affect the company? Is the risk involved small or big?
- What can possibly go wrong? If something goes wrong, how can the effects be less severe? What potential steps can be taken to prevent loss (of money, productivity, other resources)?
- If losses occur, what are the potential measures that can help recover those?
- And if an untoward event happens, how will the company compensate the affected parties?
Our Favourite Agile Books
We found these books great for finding out more information on Agile Scrum:
How Risk Management Promotes Development
Risk management can promote a company’s development because it can create value for your company. It also becomes a part of your overall organizational process such as decision-making.
A risk management plan also explicitly addresses any uncertainty before it unfolds to cause harm and loss. And if your organization has a plan in place, you can take account different factors, including human factors and any potential issues and errors in making a decision.
In addition, risk management is tailored for each project, so it promotes further development because you use a customized approach for better results. As it is also inclusive and transparent, it leads to a more open collaboration and makes it adaptable to any change later.
And without even saying, a risk management plan increases success because it can be monitored and improved as you go on to adapt to internal or external changes in your organization.
Risk Management and Goal Achievement
Every single day, you make decisions that affect your organization. After all, decision-making is a primary management function that plays a crucial role for your company moving forward (or backward).
And as every risk management identifies a potential issue before it occurs, you will have a plan in place to address it because it looks into both external and internal risks that would otherwise have a negative impact to your company.
And again, risk management is as important as setting goals. They go hand in hand. After all, there should always be a backup plan in every decision you make (a risk management plan).
So, look ahead, identify risks, and execute a sound plan to overcome any roadblocks that would stop you from getting to your destination.
Consider a risk management plan today!