“Accept the inevitable and turn it to your advantage.” This adage perfectly sums up why risk management is a crucial component of any business structure. Risk is inevitable and can present itself at any given moment. It’s best for businesses to have a plan set in place to mitigate any potential issues that can result from risk and to potentially use it to their benefit. Not all risk should be associated with negative attributes. Sometimes, with a proper process set in place, risk can provide positive opportunities to businesses.
Risk can define a variety of different incidents that could potentially affect different projects, departments, or the business as a whole. Risk management processes are put in place to help companies be proactive towards incoming risk instead of being reactive. The process involves identifying, analyzing, and responding to potential risks. Below are the five steps that should be included in a risk management process:
Before you resolve a risk, you need first to be aware of what it is. An organization should take the time to brainstorm with colleagues, stakeholders, and members of the leadership team to recognize and describe potential risks that may affect the outcome of the overall business goals. Use this time to gather information, organize thoughts and procedures, and consider using a risk register template to help identify and prioritize risk.
Once you have determined the outlying risks that can occur, it is time to figure out how likely they are to occur and what you will do if they do transpire. This is the time to figure out where the risk is coming from and what the possible consequences will be. When analyzing the risk, businesses will need to address the impacts through a variety of different metrics and data. These metrics can include how costly an incident will be, the duration, and how it will affect schedules.
There will always be different levels of risk that can occur within a company. It is crucial to evaluate risks on their magnitude and potential impact to better prioritize what resources will be needed and which risks will need immediate attention. It is also beneficial to prioritize between high, medium, and low impact to ensure items are clearly organized and to avoid one long list of potential issues.
Once you have prioritized the risk, it is time to implement your response. A strategy should be developed to mitigate the risk and to provide preventative details for future incidents. The businesses action to deter the risk should be handled based upon where the risk is prioritized and the strategy created to resolve it.
It is essential that business professionals continue to monitor risk while it is on a path towards resolution and far beyond. Tracking your initiatives will provide valuable feedback on the strategic plan that was implemented and whether or not it was successful. Not only will this be beneficial for tracking new risk, but it will provide an accurate depiction of how your risk management process is working.