Risk Assessment Issues - Coursework Example

Running Head: Risk Assessment Risk Assessment GENERAL INTRODUCTION Risk is the likelihood of a loss occurring through the occurrence of an hazard that can be analyzed and measured into quantities. Its because of risks that men and women are always kept thinking so hard on their safety and the uncertainty of their events and this even makes man very cautious of all the activities that they are always involved in as well as making them consider very careful steps in everything they do. A risk is also the possibility that less than expected returns will always be experienced most so in business ventures. Risks include:- financial risk, credit risks, inflation risk, economic risks, mortgage risks, exchange rates risk, interest rates risks, prepayment risk, opportunity risk and also unsystematic risks. All the above risks posses a challenge of exposure to risks of loss hence uncertainty and instilled fear in major economic, social and political pillars of the society (Adams,pp 23). Risk assessment on the other hand involves a systematic method of looking at or identifying work and field activities activities, considering all alternatives in relation to what could go wrong in is certainly likely to occur, and deciding on suitable control measures to prevent loss or help to avoid such losses, damage or related injuries in the workplace or work environments. Risk assessment is also the careful examination of the diverse and numerous factors that can bring about these risks. The Assessment should include the controls required to eliminate, reduce, and attach to cause or minimize the risks (Adams,pp111). REASONS FOR RISK ASSESSMENT Therefore, the need for risk assessment can never be underestimated given that it is the process that will always lead individuals into risk management activities. Risk Assessments are a critical requirement and necessity for most human and businesses organizations (Wisher,pp 155-9). If you don’t know, or appreciate where the risks are, you are placing yourself as an individual, your employees if any, your customers and your organization or business in danger and all the stakeholders that surround your operations. Therefore to an individual doing business risk assessment is a must thing to ensure minimization of risks and risk related activities, this leads to profit and wealth maximization hence successful business operations. Legal environment and systems surrounding businesses given their countries of operation also forces employers and owners of ventures or businesses must always look into all work involvements that are likely to cause harm in order to decide whether they are doing enough to meet their legal obligations so as to avoid legal risk which result into financial losses as payments are made due to court orders. In business its always reasonably practicable for employers to meet the legal minimum requirement of operations as laid down by the law requirements of the land or state. The main aim of this should always be to assist reduce the risks as much as is reasonably practicable (Gleason,pp275-7 ). Risk assessment is also meant to help reduce the costs of operating business. This is because when stringent risk control measures are put in place, there would be less payments for insurance premiums hence reduced insurance costs. Risk assessment also contributes to social well being of the societal members. This because with the psychological feeling of reduced risk comes the peace of mind and this puts in place a peaceful and healthy growing society. PROCEDURE OR PROCESS OF RISK ASSESSMENT Normally, there are no hard or fastened rules as to how risk assessment should be conducted due to the sole reason that each and every organization is unique and very much different from each other. This difference is on the diversified ways in which most organizations and businesses operate, the kinds of businesses in which they are involved which are also not the same and also the laws that govern each and every business (Luhmann,pp236). This therefore calls for a general form or procedure of risk assessment exercise which involves the following steps:- I. Identifying the hazards that are related to your work operations II. Identifying all stakeholders who are likely to be affected or harmed by the hazards identified III. Identifying your control measures i.e. how you can presently manage the risks and what the further steps that might be required to even reduce the risks further in the future or even how they can be fully mitigated or avoided. IV. The findings from risk assessment should be adequately recorded and then inform those at risk of all the controls at their disposal or remedy. V. Review and evaluation of the Risk Assessment should be done always on a regular basis, e.g. incase of a change in the staff, the activities or operations, or the equipment and machinery employed. Then review is always mandatory Control of risks involves considerations as to whether the identified can be avoided or eliminated; whether they can be contained at their respective sources or where attached; can they be reduced or impacts minimized; also whether technical controls can be employed and so forth. Review and evaluation can always be done by looking at the operations critically and observe how the operations are done and then considering the guidelines and procedures. After these, new and appropriate measures should always be put in place if necessary (Luhmann,pp217). BENEFITS OF RISK ASSESSMENT Benefits derived as a result of conducting risk assessment procedures or processes are much if not many. This is due to the fact that in business operations there is always need to know that risk exists, which risks exists, the intensity of the risks outlined and then recommendations on how to do away with manage such risks. The benefits of assessment are therefore as follows:- They ensure that any operation is undertaken under certainty; They help in risk identification and categorization; They assist business managers with information on risk that aid in efficient decision making; Helps firms in the formulation of objectives geared towards risk minimization and profit maximization; Through repeated reviews of risk assessment process, firms are able to develop a bank of knowledge that is beneficial on development of risk management strategies (Gleason,pp245-9). In as much as the benefits of risk assessment are reaped by the business owners through the protection of their ventures and help them in achieving their objectives, also the insurance industry receives some gainful support since the assessments add to their structural operations hence contributing to order and sanity in the industry. The governments also reap much since recurrent expenditure through the central government budget is drastically reduced and can be reinvested in some other productive areas for overall development. CHALLENGES FACED IN RISK ASSESSMENT Challenges exist under three main dimensions: - challenges by risk assessors; challenges by businesses and organizations and even challenges by the governments. Risk assessors are face very fresh and new challenges, in particular as technology advances developments in wide areas have exceeded the ability of research bodies or assessors to generate safety data and of risk assessors to change and apply appropriate tools to evaluate emerging risks (Adams,pp172-182). Assessors also face a challenge of inadequate funds that limits their activity of conducting quality and efficient risk assessment exercise. Risk assessment due to its nature, requires a great number of personnel which has the skills and knowledge, this is normally very hard to get to get and incase they are able to access them, they are always very expensive hence unaffordable. Complexity in the nature of the risks handled makes the analysis of such risks and even their review very difficult, this challenge may result into well laid down risk objectives being solved by irrelevant assessment results. The government through the insurance industry normally undergoes so much cost incase a risk assessment plan fails. This is due to the sole purpose that the government will now be required to establish a very wide budget towards protection of its citizens against risk and risk related activities. CONCLUSION As we have observed, risk assessment is an involving activity on its own and therefore requires an allocation of resources for its efficiency and effectiveness. Likewise, its an important and integral exercise that must always be undertaken incase an organization or business wishes to under go less expenditure in terms of resources against risk management hence should never be overlooked . therefore, for an assurance that organizations will always operate under minimum risk exposures its always recommended that risk assessment is conducted before policies are adopted. Works Cited Adams, John. RISK: AN INTRODUCTION. Toronto: Happer Collins, 1995. Gleason, James T. Risk: the new management imperative in finance. Princeton: Princeton University Press, 2000. Luhmann, Niklas. Risk: a sociological theory. Washington: Prada University Press, 2005. Wisher, Benjamin. At risk: natural hazards, peoples vulnerability and disasters. New York: Paragon Books, 2004. Read More