What is a risk manager? According to Wikipedia (the free encyclopedia): “In business, a risk manager is a professional who helps companies evaluate and minimize the adverse effects of unexpected events or unforeseen disasters.” Risk management is an action plan, usually involving a group of individuals or teams, which considers the impact of potential events or conditions on the success, performance, or value of a company. The term “risk” is used to refer to any event, condition, or situation that has the potential to bring harm to the participants or the entire organization.
How then does one identify risks? When deciding what actions to take in response to identified risks, it is important to keep in mind that no single factor can provide an accurate assessment of the risk profile for a specific product, procedure, or technology. Some risks are likely to occur, while others are unlikely. Likewise, some events may be prevented or controlled; others are uncontrollable. It is important that a company take an holistic approach to assess risks and minimize the likelihood of negative outcomes.
How then does a risk manager evaluate risks? A risk manager will first collect and evaluate information relevant to assessing the risk of an event or condition. This information typically includes: company documents and literature, customers’ comments, financial statements, studies and reports, analysis, and case histories. Once this information is gathered, it will be subjected to a number of common risk management approaches. One approach involves identifying the sources of potential loss and the degree of reliance on these sources, next analyzing the exposure and the consequences of exposure, determining if any of the sources of potential loss should be taken into consideration, next determining the likelihood of an event or condition occurring, analyzing the implications of an event or condition, and finally developing a strategy to deal with the risk. While many of these strategies may be different for different types of risks, all have been described in the previous paragraph as typical risk assessments.
What is a risk to a business is also an issue that is considered by some risk managers. As part of this assessment, a business is usually asked to look at how much risk the business would face, what types of losses are likely, the amount of money that will be lost if a risk occurs, what effect a loss will have on the business, and finally, how a business can protect against a loss. Other typical questions asked include whether an exit strategy should be designed, the degree of internal support needed for a plan to work, what will happen to current employees and the impact on their lives and careers if the plan does not work, and the need for additional funding if the plan does not work.
The ultimate goal of an individual or a company conducting risk assessments is to reduce the number and/or severity of risk. For example, in assessing the safety of a warehouse, risk managers will typically consider the hazard of an explosion, the amount of power needed to run the machinery, the frequency with which shelves will collapse, the amount of lighting required, and the effectiveness of emergency telephones. These risks may need to be investigated in depth in order to identify and eliminate them; however, no matter what type of risk exists, it can always be removed or reduced. Therefore, risk managers will always aim to remove as many sources of risk as possible.
In today’s economic environment, risk managers must work hard to stay ahead of the curve. Many companies are reducing their budgets and trimming their staff in order to remain competitive. It is becoming increasingly difficult for them to manage risk because of these drastic changes. For those who are interested in the field of risk management and have the drive and motivation to succeed in this demanding field, a degree in management may very well be your best choice.
There are some very good schools and colleges that offer a variety of management degrees. You may want to do a search on the internet to find out where your nearest school or college is. Most risk managers graduated from business school, and most also went through a thorough background investigation to make sure they were not guilty of any criminal conduct or charges for securities fraud. It is important to get a clear understanding of the educational requirements to be a risk manager.
If you are interested in becoming a risk manager, the best thing you can do is to gain more relevant experience in the field. The more experience you have working in the field the more likely you will become an effective risk manager. The most important aspect is to gain enough experience so that you are well qualified to become an effective risk manager.