Risk control and risk management are two essential parts of any organization’s efforts to manage risk. Understanding the difference between the two is critical to identify vulnerabilities, monitor risks, and make informed decisions on managing risk effectively.
In this article we’ll explore those distinctions between risk control and risk management, and provide five tactics for mastering organizational risk management. We’ll also discuss the three fundamental risk categories that all organizations should consider when developing risk management strategies.
Risk Control vs. Risk Management: How Do They Differ?
Risk control refers to mitigating or reducing the risks associated with a particular activity or situation. In contrast, risk management is a broader term that encompasses your whole effort to identify, assess, and treat risks across an organization or project.
Risk control involves implementing measures to reduce the probability or impact of potential risks. This may include strategies such as implementing safety procedures, creating backup systems, or employing preventative measures to reduce the likelihood of bad outcomes.
More specifically, risk control focuses on minimizing the effect of identified risks on a specific activity or project. This method uses the results from risk assessments to identify possible risks in a company’s operations.
Risk management, on the other hand, is a broader and more complex process that identifies, assesses,, and treats various types of risks across an entire organization. It involves a holistic approach to analyzing all potential risks, including new risks emerging from technological advancements and cybersecurity threats.
In other words, risk control is one part of risk management, but only one part. Risk management is something much larger and more far-reaching.
5 Tactics for Mastering Organizational Risk Management
An effective risk management program is vital for organizations to assure business continuity in the face of unpredictable events. This requires mastering tactics to minimize risk factors and maintain long-term operational success.
In this step, organizations identify all the potential risks that could harm their business objectives, including security risk, compliance risk, financial risk, operational risk, supply chain risk, and strategic risk. The risks are categorized and a risk register is created, which contains details about each risk’s nature, sources, and potential impact.
To put your risks in a logical priority, organization must first conduct a thorough risk analysis, including worst-case scenario analysis, to determine the level of risk associated with each identified risk. Then the risks are prioritized based on their likelihood of occurring and potential impact on the organization, taking into account the organization’s risk appetite.
The organization can then use the prioritized risks to focus its resources and efforts on addressing the most critical risks first while staying within its risk appetite.
With that list of prioritized risks, organizations can develop a response plan outlining how to address each risk. The response plan may include risk reduction, risk avoidance, risk transfer, or retention of the risk. For example, an organization may develop internal controls to mitigate a financial risk, or decide to transfer the risk to an insurance company by taking out an insurance policy.
Risk mitigation steps can reduce the likelihood or impact of identified risks. This may include developing contingency plans, establishing backup systems, or implementing safeguards to prevent potential risks from occurring. Risk mitigation measures should be selected based on the level of risk and the potential impact of the risk on the organization’s stakeholders.
The final steps in the risk management process are (2) continuous monitoring of risk; and (2) regular review of the effectiveness of the risk management plan. This helps organizations identify any new risks that may arise and evaluate the effectiveness of the risk mitigation measures that have been implemented. Regular risk monitoring allows organizations to adapt their risk management plan to assure that it remains aligned with their business objectives and continues to manage risk effectively.
What Are the Three Fundamental Risk Categories?
Understanding the three primary risk categories is vital to identifying, assessing, and mitigating organizational risks effectively.
Preventable risks are risks that organizations can mitigate or eliminate by implementing adequate internal controls. Preventable risks include operations-related risks, such as process failures, system breakdowns, or human error.
Active prevention is a practical approach to mitigate and eliminate preventable risks. It involves implementing robust internal controls, policies, and procedures to identify, assess, and reduce potential risks. This requires a comprehensive understanding of an organization’s risks and a proactive mindset toward risk management.
Strategic risks are associated with achieving strategic business objectives, such as entering new markets, launching new products or services, or coping with new regulations. These risks can arise from factors such as economic downturns, disruptive technologies, or shifts in consumer behavior; they are often beyond a company’s control.
Strategic risks can difficult to foresee, and require organizations to be adaptable to changing market conditions. To manage strategic risks, organizations need to conduct regular risk assessments, develop contingency plans, and assure that their risk management strategy is aligned with their overall business objectives.
These risks are outside the organization’s control and are associated with political instability, natural disasters, or cyber attacks. External threats can significantly impact an organization’s operations, financial stability, and reputation.
As these risks can’t be prevented, companies should try to identify them and then mitigate the potential damage. That might include using a robust risk management framework that enables a company to identify and evaluate external risks and then take measures to minimize the impact on the organization.
Simplify the Risk Management Process With RiskOptics ROAR
The RiskOptics ROAR Platform is an invaluable tool to enhance your cyber risk management strategy. ROAR gives you complete visibility into potential risks and their impact on your business operations. The platform’s holistic approach to risk management empowers you to make informed decisions, allocate resources more effectively, and safeguard your organization’s digital assets.
Schedule a demo today to see how the ROAR Platform can help you overcome risk management challenges.