Complete understanding of risk management, components, types, and purpose in business

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Complete understanding of risk management, components, types, and purpose in business

Complete understanding of risk management components types and purpose in business

Risk management is a theory that must be applied in building a business or business. Because without good management, employers cannot detect bad things that can overwrite the company. Ironically the company can experience a decrease or collapse without knowing what caused it.

Therefore risk management is important in addition to marketing management and business management other than. Unfortunately there are still many who know about this management theory. Including knowledge related to understanding, components, types and objectives of risk management in business.

Understanding of risk management

Risk Management is all processes of activities carried out simply to minimize even preventing the occurrence of the company’s risk. Inside there are identification activities, planning, strategies, actions, supervision and evaluation of negative things that are likely to befall efforts.

It is also possible that this type of management is one method to prevent the company prevent problems. Like collapse, large losses, roll mats, shunned by clients and the like. Of course this systematic strategy needs to be run primarily for beginner businessmen.

Understanding of risk management according to experts

In addition to the general understanding above, it turns out that many experts interpreted the meaning of red acceptant risk management. Here are some of them:

Fahmi (2010)

According to Fahmi Risk Management is a disciplined science that studies organizational actions in solving systematic and comprehensive management-based problems.

Djojo Soedarso (2003)

Djojo Soedarso has a different view. According to him, risk management is the application of management functions in general to map the problems and solutions that occur in a corporate and family and community organizations.

Tampubulon (2004)

While according to the Tampubulon Risk Management is a process done to accommodate all the possibilities of a bad business transaction.

Darmawi (2014)

According to Darmawi, risk management is an attempt to know, analyze and control risk in every company’s activities with the aim of obtaining higher effectiveness and efficiency.

Bramantyo (2008)

Bramantyo argues that risk management is a structured and systematic process in identifying, measuring, mapping, developing alternative risk handling.

Noshworthy (2000)

Risk Management According to Noshworthy is the Implementation of Measures Aimed at Reducin The Like Lihood of Those Threats Occuring and Minimessing Any Damage IF They Do; Risk Analysis and Risk Control Form The Bases of Risk Management WHERE Risk Control Is The Application of Suitable Controls To Gain A Balance Between Security, Usability and Cost.

Djohanputro (2008)

According to DjohanPutro risk management is a structured and systematic process in identifying, measuring, mapping, developing alternative risk management, and monitoring and controlling risk management.

Siagian and Sekarsari (2001)

Understanding Risk Management According to Siagian and Sekarsari is a broad risk management not only focused on insurance purchases but also must manage the overall risk of organizational risks.

Siahaan (2007)

The definition of risk management according to Siahaan is an act (practice) with risk management, using methods and equipment to manage the risk of a project.

Smith (1990)

According to Smith understanding of risk management is the process of identifying, measurement, and financial control of a risk that threatens assets and income from a company or project that can cause damage or losses to the company.

From some understanding of the experts it can be concluded that risk management is a process of structured and systematic in identifying, understanding and developing alternative handling of all risks carried out by business people. This type of management is a good strategy to make the company develop. Even though various kinds of risks and bad things are ready to happen to him.

Risk management component

Risk management has certain components that distinguish it with other business management. This instrument must be in new management the implementation process can be done optimally. This is the component in question:

Internal environment

The internal environment means that there are all risks that are likely to occur within the company’s internal. In this component, there is no detection of risks that occur between companies and external factors such as customers, clients and such. Even though sometimes this internal risk effect also impacts on this matter.

Internal environmental components in risk management are related to employee discipline, working ethics, employee competencies, subordinate welfare levels and other than. This is also necessary to detect management to prevent the risk of the criteria.

Target determination

The target determination means that the company must include a clear risk target that will try to be resolved through the management system. In it usually includes two things, namely the risks that arise from the vision statements and business missions and the risk objectives that come from technical or operational activities.

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Not denied by every company must have a business vision and mission. But sometimes what is desirable is not in line with expectations. Well with this component, it can be explained what the problem is and how to solve it.

Likewise what is related to technical or operational activities. It cannot be denied if the vision and mission is good, but when it has been carried out it becomes bad. This can be related to worker competence or compliance with lacking planning.

Identification of events

The third risk management component is identification of events. The point is that it is not mentioned risk management if the company does not have detailed data on events identification results. This should indeed be obtained before the business began to run.

For this component may not accommodate all risks. But minimum potential activities are with various considerations of problems that appear much larger. Even so, not all business events are identified harm. Therefore, please save which events are positively valuable which are negative.

Risk Assessment

Enabling a company or business organization to assess an event or circumstances and relation to the achievement of the company’s goals or business. The management needs to conduct an analysis of possible impacts due to risk with 2 perspectives, namely: likelihood (tendency / opportunities) and impact / consequence ( The amount of risk realization).

Risk response

In addition to conducting an assessment of risk, it also determines the response or response to the risk. The response from management depends on what risks faced. The response or response can be in the form of:

  • Avoid risk (avoidance)
  • Reducing risk (reduction)
  • Transfer Risk (Sharing)
  • Accept Risk (Acceptance)

Control activity

After being given a response, the pressure is the preparation of procedures and policies that help ensure that the response to the risk of being selected is adequate and well implemented. This risk of contracted activity includes:

  • Policy making and procedures
  • Delegation authority
  • Security of wealth companies
  • Separation function
  • Supervision

Information and communication

This activity serves on information identification and deliver it to related parties through communication media. Relevant information is identified, obtained, and communicated in the right form and time so that personnel can carry out their responsibilities properly.

Monitoring

Monitoring is the last component in risk management. The monitoring process is carried out continuously to ensure each other component is functioning properly. The important thing to note in the monitoring process is incomplete or excessive reporting.

Types of Risk Management

In addition to having special components, risk management is also distinguished into several types. Among others are:

1. Operational Risk Management

Operational Risk Management is a risk management based on the occurrence of business problems that arise due to internal factors. Like low employee performance, poor quality resources, disasters, unhealthy capital and other than.

In general, target coverage for risk management this type is human factors, systems, processes and external problems but those who are not related to customers but appear to itself like a disaster. This is the field of completion for operational risk management.

2. Hazard management

Hazard management is a type of risk management that focuses on potential problems to make a company roll. Usually the problem detected business problems are big and dangerous problems.

There are three elements prioritized in this type of management. Namely legal issues, physical hazards and moral decreases. These three things must be anticipated if the possibility of a potential danger there.

3. Strategic risk management

This management is related to decision making. Risks that usually arise are unexpected conditions that reduce the ability of business people to carry out planned strategies. In this case several factors such as the risk of operation, the risk of asset impairment, competitive risk or even the risk of frenchise (if any). In this Majemen there are several things you can go to this strategic risk. You can make some of the following list:

  • List of Risks
  • The risk assessment is in accordance with the tendency and also the impact
  • Assessment of current conditions that are happening
  • Action plan if the worst risk really appears

4. Financial Risk Management

As the name implies must be understood that financial risk management is the management of the focus on the company’s finances. The detection is directed how much as possible so that the company does not collapse only because of funds, capital, profit and other than.

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With this management, of course the company will provide protection against all company assets. The aim is nothing but finance to stay healthy so that it can be contributed to the future business development.

Risk Management Destinations in Business

Risk management is carried out alone for certain purposes. These outside these goals have the potential to damage the company if they are not immediately achieved. Here is the purpose of the intended: to protect the company

The first goal is to protect companies from dangerous business risks. So that the business entity remains standing even though there are various kinds of problems and negative things. Protecting companies with risk management more successful than not. Because before the problem occurs, the type of problem has been detected first.

Helps making a framework

With the existence of risk management, of course the solution to the problem of the company can be found. Well, for the actualization, there is only a framework that is in accordance with the solution. This is the reason why work management can help manufacture a framework. For this reason, the accompanying policy can also be decided immediately.

As a warning alertness

With the doing risk management is certainly all the bad things that will appear to be detected. Therefore, this can be used as material to remain vigilant and careful in managing it. You can imagine if there is no risk management, of course bad things will just happen. Because there is no caution in work and all employees work without taking into account the risks in it.

Improve company performance

Helps improve company performance by providing risk information mentioned in risk map / risk map. It is also useful in the development of strategies and improvements to the risk management process continuously.

Risk Management Socialization

Build individual and management capabilities to socialize understanding of the risks and importance of risk management.

Encourage management to be proactive

Encourage management to act proactive in reducing potential risks, and making risk management as a source of competitive advantage and company performance.

That is a complete explanation of risk management. Just suggest, please study this chapter if you want to open a business in the form of a company. Guaranteed you are better prepared than those who don’t run it.

Conclusion

After you know the understanding of risk management in depth, it’s time for you to apply it. Risk Management At a business is a must, especially in the current age when everything changes rapidly. If you cannot manage risk correctly, it can be ascertained that your business is in danger.

Being adaptive to change is also one solution to the changes that occur, and this will distinguish you, whether changes have a negative or positive impact on your business.

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