What is Risk Management and Why is it Important?
Risk management is the process of identifying, assessing, and controlling threats to an organization’s capital and earnings. So These threats, or risks, could stem from a wide variety of sources, including financial uncertainty, legal liabilities, strategic management errors, accidents, and natural disasters. So IT security threats and data-related risks, and their strategies to alleviate them, have become a top priority for digitized companies.
As a result, a risk it plans increasingly includes companies’ processes for identifying and controlling threats to its digital assets, including proprietary corporate data, a customer’s personally identifiable information (PII), and intellectual property.
Every business and organization faces the risk of unexpected, harmful events that can cost the company money or cause it to permanently close.
Risk management allows organizations to attempt to prepare for the unexpected by minimizing risks and extra costs before they happen.
By implementing a risk management plan and considering the various potential risks or events before they occur, an organization can save money and protect its future.
This is because a robust risk management plan will help a company establish procedures to avoid potential threats, minimize their impact should they occur, and cope with the results. This ability to understand and control risk enables organizations to be more confident in their business decisions.
Furthermore, strong corporate governance principles that focus specifically on it can help a company reach its goals.
Other important benefits of risk management include:
- Creates a safe and secure work environment for all staff and customers.
- Increases the stability of business operations while also decreasing legal liability.
- Provides protection from events that are detrimental to both the company and the environment.
- Protects all involved people and assets from potential harm.
- Helps establish the organization’s insurance needs in order to save on unnecessary premiums.
- The importance of combining risk management with patient safety has also been revealed.
In most hospitals and organizations, the risk management and patient safety departments are separated; they incorporate different leadership, goals, and scope.
However, some hospitals are recognizing that the ability to provide safe, high-quality patient care is necessary to the protection of financial assets and, as a result, should be incorporated with it. In 2006, the Virginia Mason Medical Center in Seattle, Washington integrated its risk management functions into its patient safety department, ultimately creating the Virginia Mason Production System (VMPS) management methods.
VMPS focuses on continuously improving the patient safety system by increasing transparency in risk mitigation, disclosure, and reporting.
Since implementing this new system, Virginia Mason has experienced a significant reduction in hospital professional premiums and a large increase in the reporting culture.