Risk Management Can Be Proactive Or Reactive
A recent blog by Carol Williams (https://www.erminsightsbycarol.com/risk-reduction/) discussed risk reduction as a strategy for managing risk. Some of her examples – exiting a market, discontinuing a product – are akin to another risk management strategy: risk avoidance. The difference between the two is that avoidance is proactive while reduction is reactive.
In proactive risk management, before any major change in operations – new projects, new processes, expansion – analyze the costs and benefits and consider what could go wrong before starting. If the chance of loss is too great, avoid the risk. Reactive risk management is looking at existing operations that are not going well and using risk control, reduction or transfer to improve results.
Proactive and reactive risk management are not mutually exclusive. Risk management is a continuous process, from initial analysis through developing and implementing strategies to monitoring results. Risk is not static, and what worked in the past may not suit present conditions.