Question

In risk identification, internal control and internal records of a typical organization are key in facilitating risk management, as a whole (Vaughan, 1997). In addition, people assigned to manage risks is also important in order to ensure that there is a high level of commitment to minimize risks and losses.

a. Discuss four (4) sources of risk identification in order to analyse organizational risks.

b. Discuss four (4) important responsibilities of a risk management department in an organisation.

Answer 1

a. Discuss four (4) sources of risk identification in order to analyse organizational risks.

Risk identification is an important aspect to mitigate & avoid risk in advance. Organizations can utilize various internal & external sources to analyze & determine risk. Four sources of risk identification in order to analyze organizational risks are:

1. Company's past performance & literature review.

2. Surveys / Questionnaires.

3. Interview.

4. SWOT analysis.

1. Company's past performance & literature review: Literature review and Company's past performance data plays a major role in analyzing & mitigating the risk. It gives ideas about the past weaknesses that organization's faced, and helps to avoid such steps or processes which impact the organization's working. Literature review and Company's past performance data give insight to the organization that where it lacks to achieve its target. For example: To determine downsizing of sales, companies can utilize past performance data, and identify the points which affect the sales.

2. Surveys / Questionnaires Method: Another source to identify the organizational risk is survey or questionnaire method. These are external sources for identifying the risk where targeted groups are asked to provide feedback over the project or some issue raised by the company. Data collected in the form of feedback helps to mitigate risk & bring change in implementation plan. Questionnaire is a tool used to obtain relevant information about any product/service which is then analyzed & utilized for betterment & enhancement of product/service by removing risk prone elements from it. Survey method is used to understand & analyze the cause & effect relationship.

3. Interview: Interview is an excellent tool for evaluating & identifying risk because they are open-ended, discovery-oriented & allow the interviewer to explore the feeling & perception of interviewee on the related subject. Companies use interviews to understand & analyze the perspective of their employees or other targeted candidates for analyzing organizational risk.

4. SWOT analysis: SWOT analysis is also called Internal & External analysis, and it helps to identify core associated risks. The Internal Analysis focuses on the strengths & weaknesses of the firm, whereas External Analysis examines opportunities & threats that exist in the environment. Overall SWOT analysis is necessary to the organization to identify & mitigate risk. SWOT analysis helps to remove risk & turn them into opportunity. It is one of the common & widely accepted sources used by the companies. Every company uses this analysis to evaluate risk.

b. Discuss four (4) important responsibilities of a risk management department in an organization.

Now-a-days every organization has a separate department for managing risk. They play a major role in managing, mitigating, and avoiding upcoming risk.

Four (4) important responsibilities of a risk management department in an organization:

1. Identifying The Risk: Risk Management department is responsible for identifying the upcoming risk by conducting surveys, doing interviews, filling questionnaires, using literature review, or using SWOT analysis. They are responsible for assessing & identifying the level of risk.

2. Develop Methods to Mitigate Risk: Risk management department is responsible for developing various methods to mitigate risk. Risk management department is the backbone of an organization who helps to tackle risky situations effectively. For example: Risk management department is responsible for developing various methods such as enhancing product design & managing product price to reduce falling sales of product of the company.

3. Formulation of Risk Management Policies: Risk Management department is responsible for formulating risk management policies. Risk management department supports management to form various risk management policies. Risk management policies are used to manage in-house risk & to deal with external risk too.

4. Provide risk awareness training to employees: The Risk Management Department plays an important role in creating awareness & managing risk by providing training to the employees. They are responsible for planning training sessions for employees which help them to tackle risk-based situations.

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