One of the important components of effective risk management in the company is the existence of an effective methodology for tracking the risks studied, since it is at this stage that skipping, underestimating and/or misinterpretation of the circumstances and conditions of their occurrence leads to an increase in the level of uncertainty, increasing the probability of creating adverse factors, forming risks themselves, increasing the overall level of risk load on the activities of the authorities, and as a consequence, they make incorrect and untimely management decisions that negatively affect companies as a whole.
Risk tracking is the activity of systematically monitoring and evaluating the effectiveness of risk mitigation actions according to established parameters throughout the process of selecting and developing further risk mitigation options or, as appropriate, implementing risk mitigation plans.
Risk tracking is a complex of the consecutive actions directed to identification, identification, assessment, an evalvation, prevention possible earlier and further monitoring of the conditions and circumstances promoting formation of both risks, and factors of their emergence.
Risk factor is a combination of adverse changes in the risk environment that have a high probability of occurrence and a sufficiently high level of materiality for the business.
Risk tracking algorithm can be divided into 6 steps:
- find changes in the risk environment (including possible ones)
- analysis of detected changes in the risk generation environment;
- identification of negative changes in the risk environment;
- factor evaluation (valuation and quantification);
- early warning of risk factor and its negative consequences;
- create a risk that requires timely and effective management.
Risk tracking methodology used to minimize management risks, you can:
- find and filter all changes in the external and internal management environment in a timely manner;
- assess the potential for adverse effects of the detected changes.
- determine by the level of materiality and probability of negative changes, the possibility of forming risk factors;
- quantify and value them;
- consider early warning to minimize the costs of subsequent risk management;
- organize and identify risks for common management approaches and minimize the use of limited resources.