Professor John Song Potomac MD explains what business risk management is and what to do if an event occurs to you if you didn’t plan for it.
Risk management is when a company attempts to forecast any risks that can occur in order to prevent undesirable events, which can negatively impact the company. John Song Potomac MD has seen far too often businesses get hit out of nowhere with events that occur that they didn’t expect and this harms the business and can potentially put them out of business. Risk management is in place to prevent any risk of harm to the company including the employees. Risk management started to become popular the second half of the 20th century due to the fact that companies knew they had to start putting in more efforts since a major incident occurred and they didn’t want the same to occur to them. Taking the time to identify risk management is crucial for ones success as a company. Certain identifiable ricks that threaten the viability of a company or product would be new rivals but businesses rely on more formal approaches.
John Song Potomac MD explains that there are different types of risk management such as currency risk management, project risk management, credit risk management, financial risk management, and operational risk management. The way that companies can approach risk management is by identifying the risks, analyzing them, measuring how to reduce or eliminate the exposure to loss. You also need to measure how large the risk is and how bad it can affect the company. Businesses are often told to get insurance in case a flood or fire occurs. There are three variables to define risks, which included the probability of occurrence of the threat, the probable availability of vulnerabilities, and the potential impact.
There are also different forms of risk such as external risks and internal risks as well. John Song Potomac MD explains that the external risks such as competition, customer changes, contacts, relation ships with suppliers, regulations and culture are mostly risks that you cannot control. You can’t control what other competitors have, you can just base yourself off of what they are doing that makes them stand out and what you can do to get on their level if you aren’t quite there. When it comes to customers changing buying habits, you can somewhat control this by advertising differently or possible rebranding. Internal risks are linked more to capital, research and development and information systems. This can mostly be protected with insurance.