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Risk management is a proactive process for identifying and controlling risks. Businesses can minimize threats and increase opportunities when using this model.
FREMONT, CA: Once a goal has been established, the risk management process identifies potential risks in advance. Risk identification should occur early in the project and not in the middle or during the project, as it may be too late.
There are two methods for risk assessment:
Risks can be placed in advance using the following visual risk management techniques.
Flowchart of Decisions
When confronted with various possibilities, decision trees are utilized to make decisions. This results in a more informed judgment. It enables the evaluation of the worth of outcomes and the likelihood of reaching them.
How to apply it
Step 1: Identify decisions and create a decision tree diagram based on the available uncertain options' findings, costs, and rewards.
Step 2: Assign a probability of occurrence to a danger.
Step 3: In this step, one must determine the risk's monetary worth or how much it would cost him if the danger materialized.
Step 4: Multiply the probability and impact of each decision path to obtain the Expected Monetary Value (EMV).
Whether an individual is embarking on a new project or developing a new process, a SWOT analysis can assist him in gaining insight into potential risks. It helps him in identifying the event's strengths, weaknesses, threats, and opportunities.
Diagram of Influence
An influence diagram is used to depict the decision tree's summary of information. It illustrates the known and unknown variables at the time of decision-making and the relationships between them.
Rectangles denote decisions, ovals denote uncertainty, and diamonds represent values or required outputs. Arrows indicate the relationship between each variable.
How to apply it
Step 1: Determine the decisions that must be made to accomplish the objective.
Step 2: Consider the risks and performance factors that may affect the objective's achievement.
Step 3: Recognize secondary factors that contribute to the uncertainty surrounding performance factors.
Step 4: Identify secondary risk factors that may affect primary risk factors.
Step 5: Continue elucidating the factors that contribute to uncertainty until all significant risks are identified.
Diagram of a Fishbone
The fishbone diagram or Ishikawa diagram or cause and effect diagram dissect a problem and determines its root causes. It works backward by assisting in the identification of the causes of a particular effect.
Process maps illustrate the significant steps and relationships within a process. By describing the process using a process map, an individual can ensure its accuracy. This helps pinpoint bottlenecks and roadblocks as well.
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