No matter the industry, all businesses face risks at one stage or another. However, by implementing a risk management plan these risks can be reduced or even eliminated.
Managing risks requires following a few basic steps. These include but are not limited to the following:
- Decide what matters most: Before creating a risk management plan, you need to decide what areas of the business it will refer to. Both internal and external factors will need to be considered when creating and implementing a risk management plan.
- Consult with stakeholders: This step is very valuable as consulting with stakeholders allows your plan to be more specific and useful for the organisation. Stakeholders that can be consulted include; employees, contractors, clients, customers, suppliers and investors.
- Identify the risks: This is another crucial step as it allows you to identify what could potentially go wrong and the events that could lead to a risk or incident. This can be achieved by looking at past events and risks, possible future business changes, reviewing audits and safety reports and conducting a strengths, weaknesses, opportunities and threats (SWOT) analysis.
- Analyse the risks: This can be achieved by examining the potential for risks to occur, the damage that could result and the overall likelihood of risk happening. This can include using a simple rating system for the level of potential damage and likelihood of it happening:
For example: 1 to 4 for damage (1 being slight damage, and 4 being severe damage) and 1 to 4 for likelihood (1 for not likely, and 4 for extremely likely).
- Evaluate the risk: This can be completed by comparing the risk level for events that you have established against the risk rating system. In this step risks can be accepted if the potential for a risk to occur is very low or the benefits of taking a risk outweighs the potential damage.
- Treat risks to your business: By completing a risk evaluation, risks that could potentially occur and therefor need to be treated have been identified. Risks can be eliminated, reduced/mitigated, or accepted. Strategies to treat each risk should be identified in this step along with future actions to manage and update the risks in the future.
- Commit to reducing risk: This is crucial to creating a stable and positive business environment that is prepared for any potential unexpected events. In this step it is important to assign responsibility to certain staff in the event that a risk may occur and to also explain your risk management plan to employees through training programs.
Overall, risks are sometimes unavoidable, however, implementing a risk management plan can assist your business to be as prepared as possible in the event of an incident occurring.