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What is Risk?

Updated: May 21, 2021

Dear Esteemed Reader,

Thanks for the interest in this blog. Throughout this blog, I will try to share my understanding and ways to handle any type of risk especially from the perspective of a risk manager at a company setting regardless of the size, geography, industry criteria.

Each of us is exposed to some type of risk every day – whether it’s from eating, driving, investing, traveling, or something else. A person's personality, character, lifestyle, and age are some of the factors affecting the flow of one's life.

We all perform risk management throughout our daily activities whether you are a student, a senior citizen, a C.E.O., or a risk manager.

Thus, your approach to recognize what risks are, define risks, and classify them as controllable and non-controllable ones, regardless of the context of the function you are executing.

It is important to keep in mind that each person has a unique risk profile that determines his/her willingness and ability to confront risk. That profile could be derived from your risk appetite which draws the borderlines for the risks you can take.

Briefly, risks are everywhere and it is crucial how you handle managing those risks. One thing is valid for all of us. We are all risk managers.

Before any of us takes a decision, which involves a risk component, we would think about it and write associated risks on a piece of paper or just visualize in our head before taking action.

However, based on the complexity of the decision and its impacts, we need to spend more time on decision making, using different techniques.

Whether it is running many calculations or just simply writing a few scenarios simply to quantify the possible outcomes, we all spend our time, effort, and maybe other sources to support this decision-making process.

While we can also use fancy names to describe this whole process as sections of your methodology, we should better pay attention to sticking to the previously written way or methodology and improve it with the new learning outcomes we gained.

We can have new experiences on this mentioned subject and we might have learned our lessons from an associated event in the recent past. This would widen our knowledge base by adding some new information to it. Some other causes may be that we could have had a new training on that specific subject or just learned something but by reading some material.

Our brain is a stunning repository that also helps us to prepare ourselves to confront challenging tasks in life and to come up with solution alternatives.

Thus, we could confidently say that our brain is the biggest help in confronting the hurdles in life.

However, life is full of risks and one single brain can be overwhelmed to solve all problems in life regardless of the complexity level of the problem.

For this reason, it is good to have a well-crafted framework that defines our risk handling in detail so that all the steps in that process can be well defined. This kind of structured documents would help us improve the decision-making process to sound, effective and efficient.

If we systematically handle this part of decision-making, we would have more time to focus on other things.

For example, if you are a small business that does not intend to invest too much in this risk decision making but intends to focus on its own business by focusing on other activities such as producing, selling and promoting, etc.., you would look out for parties who would carry out this risk management function for you.

You must have a reliable, high-quality service that not only improves your business performance but also provides you with a sustainable solution at an affordable price.

In the end, the owner of this process is ultimately you and this choice of finding a solution does not change the flow of life and you still need to make decision making on risk-related subjects.

Do you know all the risks, your business is exposed to?

Have you already recognized and identified the risks for your business?

If so, what challenges have you confronted during these processes?

#risk_identification, #risk_appetite, #risk_management

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