What is Risk Management?
Risk management refers to the identification, assessment of a risk in regards to an investment purchase or the productive procedures of a business entity. The process of analyzing risk is undertaken to minimize damage and the subsequent costs of repairing or replacing such damages in the future. In essence, risk management is simply a practice of systematically seeking cost effective approaches for minimizing the overall effect of a problem to the organization.
Because all threats of risk can never be fully avoided or accounted for, risk management simply aims at mitigating such situations. The procedure is preemptive in nature, but also analytical; the process of risk management will not only point out and subsequently evaluate all threats of a business, but will create a detailed resolution process to limit the damages realized.
Risk management is a critical process undertaken by all companies in the United States to prevent cataclysmic events from completely destroying the company’s business model. As stated before, all companies, regardless of industry face numerous risks. From manufacturing problems to transportation crashes or building collapses, a business is susceptible to not only liability issues but post-disaster problems.
What is Business Continuity Planning?
As stated earlier, the risk management process tends to be preemptive; this process is held in contrasts to the business continuity planning model, which is underacted to deal with the consequences of a realized residual risk. The importance of business continuity planning arises because even unlikely events will occur if overlooked. The risk management process and business continuity planning are often and mistakenly lumped together as rivals or overlapping practices.
This assumption is somewhat pointless, because the processes act as compliments to one another. For instance, the risk management process creates fundamental and critical inputs for business continuity planning—risk management will analyze a company’s assets, their cost estimates and impact assessments. Furthermore, risk management will also propose applicable controls for the observed risks. As a result, the risk management process will cover several areas that are essential for the business continuity planning procedure.
That being said, the business continuity planning process is somewhat more in depth that risk management; the risk management is a preemptive approach that automatically assumes disaster will occur at some point in the future.