Initial Risk Coping Mechanism

Posted in Risk Management on April 17, 2024
Initial Risk Coping Mechanism

The purpose of initial risk coping mechanism is that identified risks are appropriately managed for effective maintenance of overall enterprise risk management practices. Organizations must be able to cope with the initial risks that arise immediately after the company’s creation and also additional growing risks that arise along the way.

Initial Risk Coping Mechanism

Initial Risk Coping Mechanism

Organizations aim to identify the risks that are likely to disrupt operations and endanger the reasonable expectation of accomplishing strategic and business goals. These risks reflect a major shift in the risk profile and might be specific events or evolving circumstances.

There is no doubt that organizations will continue to face a volatile, complicated, and ambiguous future. Enterprise risk management will be a vital part of how a firm manages and thrives in these challenging times. Strategies must remain faithful to their objective, regardless of the kind or size of an entity. All entities should exhibit traits that drive an effective response to change, including agile decision-making, the ability to respond cohesively, and then the adaptive capacity to pivot and reposition while maintaining high levels of trust among stakeholders.

The management adopts different strategies to absorb the effects of identified risks while ensuring that no significant financial and reputational impact arises, causing depletion of profitability and market share. The strategy of the organization must be built and aligned with the enterprise risk management practices to achieve the overall objective.

To cope with the identified risks, organizations create and employ a risk inventory, which is simply a list of the organization’s risks. Risk inventory aids in the development of risk coping strategies that take into account the severity and effect of the risks. Depending on the number of individual risks detected, organizations may arrange the risk inventory by category to offer consistent definitions for different risks. This enables the grouping of comparable risks, such as financial, customer, or compliance (or, more broadly, obligation) risks. Organizations may further categorize risks into more detailed sub-categories within each category. 

Risk coping mechanism is a framework that covers different components, which together form an effective framework of enterprise risk management. These components are:

Governance and Culture

Governance sets the organization’s tone, reinforcing the importance of, and establishing oversight responsibilities for, enterprise risk management. Culture pertains to ethical values, desired behaviors, and understanding of risk in the entity.

Strategy And Objective-Setting

Enterprise risk management, strategy, and objective-setting work together in the strategic-planning process. A risk appetite is established and aligned with strategy; business objectives put the strategy into practice while serving as a basis for identifying, assessing, and responding to risk.


Risk that may impact the achievement of strategy and business objectives need to be identified and assessed. Risks are prioritized by severity in the context of risk appetite. The organization then selects risk responses and takes a portfolio view of the amount of risk it has assumed. The results of this process are reported to key risk stakeholders.

Review And Revision

By reviewing entity performance, an organization can consider how well the enterprise risk management components are functioning over time and considering substantial changes, and what revisions are needed.

Information, Communication, And Reporting

Enterprise risk management requires a continual process of obtaining and sharing necessary information, from both internal and external resources, which flows up, down, and across the organization. 

Because the impact of risks cannot be limited to specific levels or functions, risk coping mechanisms and strategies should capture all the risks, and regardless of where they are identified, all risks form part of the entity’s risk inventory. For example, an entity that identifies risks at the strategy level relating to board governance and achieving diversity targets must also consider these risks at a business objective level.

Final Thoughts

People usually face more health risks as they get older. Managing pure risk entails identifying, evaluating, and reducing these risks a defensive strategy to prepare for the unexpected. The basic risk management methods avoidance, retention, sharing, transferring, and loss prevention and reduction can be applied to all aspects of a person’s life and can pay off in the long run.