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What is Risk Management • Process of Risk Management

Risk Management has been described as 'all the things you need to do to make the future sufficiently certain'.

Risk Management is regarded as the rational processes that will allow risk to be managed well. It is a well-established field of professional expertise, commonly (although still not consistently or universally) used by individuals in their daily lives but also in engineering, business, finance and government.

The prime test of good risk management is whether the measures taken will protect achievement of goals within the accepted tolerance of risk. A secondary, but still important test is whether this is achieved in the most efficient (lowest cost) way.

Standards New Zealand and Standards Australia have published a Standard for Risk Management. It defines Risk Management as "the culture, processes and structures which are directed towards the effective management of potential opportunities and adverse effects."

The Risk Management process is outlined in this diagram taken from the Standard AS/NZS 4360: 1999 Risk Management.

The risk of a proposal may include both potential benefits and potential costs. Risk Management is not designed to stifle innovation and change but to ensure that the associated risks are understood and treated in a way to make the desired outcome more likely, at the lowest nett cost.

Because Risk is an inevitable consequence of change the best time to manage risk, is as part of planning change. Typically, therefore, good risk management will be proactive.

Equally, good Risk Management will be a routine activity and will therefore be integrated into general management activity.