Risk Management Model

Risk Management Model:

Risk refer to unplanned events which cause harm to the organization and lead to disturbances and major unrest amongst the employees.

Risk gives rise to a feeling of fear and threat in the individuals who eventually lose interest and trust in the organization.

Gonzalez-Herrero and Pratt proposed a Risk Management Model which identified three different stages of Risk management.

According to Gonzalez-Herrero and Pratt, Risk management includes following three stages:

Diagnosis of Risk: The first stage involves detecting the early indicators of Risk. It is for the leaders and managers to sense the warning signals of a Risk and prepare the employees to face the same with courage and determination. Superiors must review the performance of their subordinates from time to time to know what they are up to.

The role of a manager is not just to sit in closed cabins and shout on his subordinates. He must know what is happening around him. Monitoring the performance of the employee regularly helps the managers to foresee Risk and warn the employees against the negative consequences of the same. One should not ignore the alarming signals of Risk but take necessary actions to prevent it. Take initiative on your own. Don’t wait for others.

Planning: Once a Risk is being detected, Risk management team must immediately jump into action. Ask the employees not to panic. Devise relevant strategies to avoid an emergency situation. Sit and discuss with the related members to come out with a solution which would work best at the times of Risk. It is essential to take quick decisions. One needs to be alert and most importantly patient. Make sure your facts and figures are correct. Don’t rely on mere guess works and assumptions. It will cost you later.

Adjusting to Changes: Employees must adjust well to new situations and changes for the effective functioning of an organization in near future. It is important to analyze the causes which led to a Risk at the workplace. Mistakes should not be repeated and new plans and processes must be incorporated into the system.

Simple Risk Management Model Chat:

Structural Functions Systems Theory:

According to structural functions systems theory, communication plays a pivotal role in Risk management. The correct flow of information across all hierarchies is essential. Transparency must be maintained at all levels. Management must effectively communicate with employees and provide them the necessary information at the times of Risk. Ignoring people does not help, instead, makes situations worse. Superiors must be in regular touch with subordinates. Leaders must take charge and ask the employees to give their best.

Diffusion of innovation Theory:

Diffusion of innovation theory proposed by Everett Rogers supports the sharing of information during emergency situations. As the name suggests during Risk each employee should think out of the box and come out with something innovative to overcome tough times. One should be ready with an alternate plan. Once an employee comes up with an innovative idea, he must not keep things to himself. Spread the idea amongst all employees and departments. Effective communication is essential to pass on ideas and information in its desired form.

Unequal Human Capital Theory:

An unequal human capital theory was proposed by James. According to unequal human capital theory, inequality amongst employees leads to Risk at the workplace. Discrimination on the grounds of caste, job profile as well as salary lead to frustrated employees who eventually play with the brand name, spread baseless rumors and earn a bad name for the organization.