Risk Management Strategy: A Guide to Getting Started
Most large organisations do not have a problem developing risk management programs because they got the basic framework right several years ago. The same cannot be said for newer organisations or startups that have experienced exponential growth.
These companies often rely on lean methodology principles that are not quite as effective in putting together an effective risk management strategy as it is in helping them scale. One of the significant causes of risk exposure is because many organisations think of risk management as a project.
Risk management is not a project
Risk management is a program, not a project. The Project Management Institute defines a project as temporary because “it has a defined beginning and end in time, and therefore defined scope and resources.” However, a program is “a group of related projects managed in a coordinated manner to obtain benefits not available from managing them individually.”
The first step towards creating an effective risk management strategy is first to recognise that risk management is a program and not a project. That means instead of looking at it as something with a beginning and end, it should be viewed as a series of connected projects that works together to reduce the overall risk exposure in an organization. Once that has been addressed, we can easily towards constructing a risk management framework that works.
5-step framework for creating a risk management strategy
Although there are several versions of what makes up a fundamental risk management strategy, a vast majority falls into the following 5-step framework.
Step 1 – Discover potential risks to the organization
The first step is to discover what your organisation’s potential risks are. You cannot deal with what you do not know. Taking inventory of all the things that could go wrong is a great way to prepare for the rest of the process.
Step 2 – Analyse those risks and assess their impact
The next step is to analyse the risks you discovered in the first step and try to evaluate their impact o your business. It is important to note that while eliminating all the risks you discovered might not be entirely possible, prioritizing them are. When analysing these risks, the most important factors to consider are the impact of the risk and the likelihood of its occurrence.
Step 3 – Implement Necessary Controls
The next logical step after compiling your list of possible risks and analysing the likelihood of its occurrence is to put controls in place to combat and mitigate these risks when they do occur. Examples of these controls include policies, systems or tools that allow you to manage your company’s risks effectively.
Step 4 – Monitor
After your controls have been put in place, you need to implement a system to monitor it. You need a way to track which of your controls have been met and which ones are still operational. This 3000ft view of your entire risk management operation helps you paint a clear picture of where your organisation is when it comes to risk reduction.
Step 5 – Communicate and Report Data
The final step of this framework is to report key data captured from your activities. A comprehensive risk management report helps your organizations decision makers make better decisions that will affect the company positively.
Additionally, your reports should not only focus on decision makers but should also include other key personnel, for example, lime manager, supervisor, project manager etc. The first audience will want summary information that shows the full picture while the second audience would like to see operational data. This is especially true for those who are in charge of contractor management.
Risk management software ties everything together
Every aspect of a successful risk management strategy can easily be managed using Beakon’s risk management software. Our risk management software is easy to use and comes with a free trial that lets you look at all the features without any financial commitment.