Question: Which of the following is the first step to risk management?
A Risk Mitigation
B Risk Identification
C Risk Acceptance
D Risk Monitoring
Answer: Risk Identification
| Step | Description |
| 1. Identify the Risk | This is the initial phase of identify potential risks and uncertainties that may affect your project, organization or objectives. |
| Risks can be categorized into external and internal factors. | |
| Techniques such as brainstorming, risk registers, and historical data analysis are commonly used to identify risks. | |
| 2. Assess the Risk | – In this step, identified risks are analyzed in depth to understand their nature, potential impact, and likelihood of occurrence. |
| – Quantitative and qualitative risk analysis methods may be used to prioritize risks and assign them risk scores. | |
| – The result is a list of risks ranked by their significance and the probability of occurrence, helping in risk prioritization. | |
| 3. Treat the Risk | – Once risks are assessed, strategies are developed to address them. Common strategies include: |
| – Risk Mitigation: Implementing actions to reduce the probability or severity of a risk. | |
| – Risk Transfer: Shifting the risk to another party, often through insurance or contracts. | |
| – Risk Acceptance: Deciding to accept the risk and its potential consequences. This is often done when the risk’s impact is deemed manageable. | |
| – Risk Avoidance: Taking actions to eliminate the risk altogether. This is done if the risk is too high or unacceptable. | |
| – The goal is to create a risk treatment plan that outlines specific actions, responsibilities, and timelines for each risk. | |
| 4. Monitor and Report | – After implementing risk treatment plans, it is essential to continually monitor the risk landscape to ensure the effectiveness of risk treatments. |
| – Regularly review and update risk registers and assessments, taking note of any changes in risk exposure and emerging risks. | |
| – Reporting on the status of risks to stakeholders, management, and decision-makers is crucial for maintaining transparency and accountability. | |
| – Reporting should include information on risk status, progress in risk treatment, and any new risks that have been identified since the last assessment. |