Explain What Risk Manegement Means and How Risk Should Be Determined by Calculating Likelihood of Risk and Potential Impact

Risk is inherent in any business or activity, and risk management is the process of controling the risk, companies need to take risks in order to achieve their objectives, the type and variety of risks that they face will be different for each individual organisation.
When explaining risk management and its process, it is important to note that we are talking about risk management from the security industry perspective as opposed to say the finantial industry, which may use different methods.

In the first section of this essay I will seek to explain what risk management means and how risk should be determined by calculating likelihood of risk and potential impact.The second section of the essay will explain the three stages of risk management and identify three strategies for managing risk. Finally it will explain what contingency planning means and why it is important.

Having an effective risk management program in place will lower the likelyhood or impact of a risk event should it occur, so we must seek to identify all realistic possible risks that we face be they tangible or intangible.

The term risk management refers to the process of identifying, evaluating and managing all identified or potential risks that an organisation may face whilst in the pursuit of their business objectives.

According to ISO 31000, risk is the “effect of uncertainty on objectives” ¹ risk should be determined by using a risk matrix to calculate both the likelihood of the risk occurring and the potential impact it would have if it were to occur. The matrix will assign a value to the risk ranging from negligible to severe.

The risk management process covers three seperated stages. The first is the risk assessment, second is the risk control stage and third is the contingency planning stage.

The purpose of the risk assessment is to identify and list all the potential risks faced based on the likelihood of the risk occurring and the impact the risk would have if it...