This part introduces the concept of risk management, outlines practical approaches to risk assessment, and defines risk mitigation strategies.
It will support:
Risk management is the systematic process of identifying, assessing, prioritizing, and controlling potential threats (risks) that could negatively impact an organization’s objectives, assets, earnings, or operations.
It’s not about eliminating risk entirely but rather about understanding, minimizing, and monitoring risks to reduce their negative effects and to capitalize on opportunities that arise from uncertainty.
Recognizing potential threats and vulnerabilities, such as financial uncertainties, legal liabilities, strategic errors, or natural disasters.
Evaluating the likelihood and potential impact of identified risks to determine which ones require the most attention.
Developing strategies and implementing actions to minimize the occurrence or impact of high-priority risks.
Continuously tracking identified risks and the effectiveness of mitigation strategies, adjusting as needed.
Identify and categorise risks (operational, market, regulatory, environmental, digital).
Assess:
Probability: likelihood of risk occurring.
Impact: level of disruption if it occurs.
High-probability, high-impact risks = priority risks.
Food sector example:
Arla Foods: drought risk (high probability, high impact) severely reduced milk output in Northern Europe. Demanded immediate action.
Actions to reduce probability or minimize impact of risks.
Strategies include:
Food sector example:
Carrefour introduced blockchain traceability to mitigate reputational and compliance risks.
Unilever diversified suppliers during the pandemic to avoid dependence on single distribution channels.
