What is risk based thinking?

Risk, determine risks, risk and opportunities, risk based thinking…

Have you ever heard about such words? On the other hand, are you still getting confuse with regard to RISK?

If you have read or implemented some High-level structured standards, then definitely you have faced confusion that how to incorporate or instill risk based thinking into my management system. Be relaxed! This article will systematically explain everything, which you want to know about risk. Let us begin with very basics of risk and risk based thinking which could expand your current thinking w.r.t risk fundamentals. While running the vigorous business, one needs to control the risks in organization. For this one has to think around what might cause impairment to resources and elect whether company taking sensible actions to avert that impairment. It is typically a risk assessment.

In an organization, risk is present everywhere, in every process, product and resources. Broadly, we can enlist risk such as process risk, product risk, strategic risk, business risk, management process risk, legal risk, human risk etc. every such risk has an impacts on the performance of the organization. Therefore, before it affect negatively on performance, organization have to identify and mitigate such risks in a proper manner. An organization needs to plan and implement actions to address risks and opportunities. Addressing both risks and opportunities forms a basis for growing the effectiveness of the management system(s), attaining value-added results and preventing undesirable effects.

Risk is the effect of uncertainty and any such uncertainty can have Positive or negative effects. A positive deviation arising from a risk can deliver an opportunity, but not all positive effects of risk result in opportunities. If company have not carried out formal risk assessment process, then there will be no wonder that risk from any business processes raised and impact badly to business any time. Such negative impact may be in the form of loss of sale, loss of customer, brand image, mishaps, disasters or legal issue. Therefore, it is always imperative to hook such risk well in advance before they attack on your business performance.

By adopting a risk-based approach and risk management, a company turn into proactive than only reactive, preventing or diminishing adverse effects and endorsing continual improvement.

Risk-based thinking:
• improves control
• institutes a proactive culture of development
• supports with legal compliance
• reassures reliability of quality of products and services
• Enhance customer sureness and gratification

The usual explanation of risk is the likelihood of happening of an undesirable event into the impact of the event or effect of uncertainty. Risk-based thinking is somewhat we do routinely and every so often sub-consciously. Risk-based thinking makes pro-active action part of tactical and operational planning.

The idea of risk has all the time been implied in ISO 9001 and IATF 16949 – latest edition makes it further obvious and forms it into the entire system & Risk-based thinking confirms risk is considered from the starting and all through. Risk is not restricted to undesirable events. You can practice risk-based thinking to find opportunities as well, which denote the up side of risk. Risks and opportunities are every so often quoted composed. Opportunity is not the positive flank of risk. An opportunity is a pack of situations, which makes it likely to do somewhat. Catching or not catching an opportunity then reflects various stages of risk. Risk based thinking is not exactly the risk management and even standards are not demanding for typical risk management approach that any organization has to take up.