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What are areas of risk management? What are limitations of risk analysis?

There are various areas where risk management holds very important and this is what we are going to discuss in this article:

1. Enterprise Risk Management:
Here the risk in question is the one that has negative influences on an enterprise. The impact of the risks can affect the existence of the enterprise as well as on the following aspects:
a) Resources whether human or capital
b) Products and services
c) Customers of the enterprise
d) Society (external impacts)
e) Markets
f) Environment and so on.
If the institution is financial, in such cases the enterprise risk management is considered to be the combination of the components mentioned below:
– Asset liability management and
– Interest risk rate
– Credit risk
– Operational risk
– Market risk
For the general situations a pre-formulated plan is there for dealing with the possible consequences of every probable risk. Such general plan also ensures contingency if in case the risk becomes a liability. Using the average cost per employee, cost accrual ratio, and the info above following can be estimated:
a) Cost associated with the risk
b) Probable increase in the time associated with the risk.
There are two variations which may result in risk in a process or project:
a) Special cause variation
b) Common cause variation

2. Risk management in project management:
Following activities are included:
a) Creating a risk management plan which consists of responsibilities, activities, budgets and risk management tasks.
b) Appointing a risk officer- other than project manager for a more effective management of the project problems.
c) Keeping a live project risk data base- following attributes should be mentioned:
– Opening data
– Title
– A short description
– Importance and
– Probability of occurrence
d) Creation of an anonymous channel for reporting risk.
e) Preparation of mitigation plans for the risks.
f) Summary of planned as well as faced risks and effort spent for risk management.

3. Risk management in Mega-projects:
These are large scale investment projects having cost in billions of us dollars. Some examples are tunnels, bridges, highways, airports, seaports, dams and so on. The risks associated with mega projects are usually:
a) Finance.
b) Safety.
c) Social environment impacts.
Here special methods are needed for the risk management.

4. Risk management concerning Natural Disasters:
Here risk assessment is valuable while taking care of the future needs such as:
a) Repair costs.
b) Business interruption losses.
c) Effects on environment.
d) Insurance costs.
e) Proposed cost of reducing the risk.

5. Risk management in IT sector:
The related risk is called IT risk. Information security is important and therefore several methodologies have been developed to deal with this. An example is the ISACA’s risk IT frame work for coping with the enterprise risk management.

6. Risk management in petroleum and natural gas:
Safety case regime in many countries is responsible for the regulation of the operation risk management at the offshore gas and oil industry. International standard ISO 17776: 2000 and inter-nation association of drilling state the standards regarding the hazard identification, risk assessment techniques and tools, guidelines and so on. Governmental regulations often showcase the diagrammatic representation of the hazardous events known as the bow tie diagrams in safety case submissions. Similar techniques are used in mining, health, defense, aviation, finance and industrial areas.

Limitations of Risk Analysis

The risk management process has got some limitations also which we are going to state now:
1. Prioritization of the risk management processes is too high that it becomes a hindrance in the process of completion of a project. In few cases the organization might not even be able to start off.
2. It is important to know where the risk ends and uncertainty begins but here the distinction between the two remains ambiguous.
3. Improper assessment and management can cause you waste time on the risks that may never occur. Too much analyzation can cause wastage of resources.

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