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Q: Briefly describe the components of a Risk Management Information System and how you think it can be used in organizational risk prevention.
1) A risk management information system (RMIS) Is an information system that helps standardize property values, claims, policy, exposure information and provide traceability and report management to enable the user to monitor and control the overall cost of risk management. RMIS can be placed on the organization intranet. RMIS will also facilitate the collection and transmission of risk information, including incident reporting by the local administration as soon as they occur. Typically, RMIS can include a wide range of information. RMIS has been used for some time to record details of insurance claims. Recently, the use of RMIS has become more sophisticated. It is now possible to record risk exposure details, risk control plans, and risk measures using this software package. This system can also be used to collect risk exposure information and report accidents or other events that may result in a claim for insurance. In addition to RMIS systems to record information, many software products support risk management.
These include software packages that can carry out various analytical activities and systems that can conduct risk analysis and review dependency modeling. It is generally accepted that applying the RMIS tool to an Enterprise Risk Management (ERM) can be very useful. However, the drawback often encountered is that the introduction of a large amount of risk data into a computer database can be very time-consuming. However, the benefits of data availability for detailed analysis can make an effort worthwhile.
Hopkin, P. (2017). Fundamentals of risk management: Understanding, evaluating, and implementing effective risk management, 4th Edition. Kogan Page Limited: London, England
2)Risk Management Information Systems (RMIS) have several components. Some of these modules include communication, and control activities, risk response, threat evaluation, the internal environment of an organization, and objective setting. Hopkin (2018) asserts that organizations should have a risk culture. The elements of a risk-aware culture, such as communication, leadership, accountability, and learning, are vital in defining the internal environment of companies. Risk appetite and tolerance should guide organizations on setting objectives. The risk assessment component should go hand-in-hand with the objective setting. Risk assessment helps companies to measure threats and propose strategies to mitigate them. Usually, organizations can use the 4Ts approach to respond to risks. Broadly, after aligning risks with an organization’s appetite level, it is vital to treat, tolerate, transfer, and terminate them. Developing a shared vocabulary is part of risk control. The control component, therefore, ensures that the recommended measures do not exceed a predetermined scope. Communication is a fundamental component that can reduce risks. Hopkin (2018) clarifies that organizations should use a range of communication strategies to enhance the risk management strategy. Generally, these components help organizations to take appropriate actions to control risks.
Sustainable development of organizations depends on information systems. It is, however, vital to point out that information systems risks may hamper the realization of business goals. Hence, investing in RMIS will ensure service continuity, increased security, and enhanced business reputation. According to Abbass, Baina, and Bellafkih (2016), security improves the usage of information systems and business performance. Organizations that adopt information management systems can detect and prevent potential risks. RMIS, therefore, help firms to assess risks and manage relevant information. It also allows organizations to enhance the accuracy of data by avoiding errors. Finally, RMIS assist companies in complying with legal regulations and saving costs because of improved risk management.
Hopkin, P. (2018). Fundamentals of risk management: Understanding, evaluating, and implementing effective risk management. Kogan Page Limited: London, England.
Abbass, W., Baina, A., & Bellafkih, M. (2016). Survey on information system security risk management alignment. In 2016 International Conference on Information Technology for Organizations Development (IT4OD) (pp. 1-6). IEEE.