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7 Key Components to Include in a Risk Management Plan

7 Key Components to Include in a Risk Management Plan

Risk management is one of the many important components of running a business. There are risks you face every day that you often have insurance policies for. The risk management plan is the insurance before the insurance. This means that in order to even know what types of insurance policies, company procedures, technologies, or training protocols you need, you’ll need a risk management plan.

This plan is a corporate document that describes the overall approach to managing risk, outlines the procedures for assessing and managing risks, and details as to how the organization will identify and respond to new or emerging risks. If you are new to creating a risk management plan, here are some of the essentials:

1. Create an overview of the company or organization.

A risk management plan should include important facts about your company or organization. This can include the mission and values, goals, corporate structure, policy for risk management, and even a basic framework for managing risks. This part of the document should give anyone who reads it a basic understanding of who you are and what you are trying to accomplish.

2. Do an assessment of the current risk profile.

The second step in developing a risk management plan is to assess the current risk profile. This means that you’ll need to ID the various risks that exist in your organization and how likely they are to occur. Risks can involve fires, natural disasters, someone getting injured at work, theft, fraud, cyberattacks, litigation due to HR, harassment, discrimination, and so much more. You’ll need to discuss each risk in detail and figure out which ones are most likely to occur.

3. A description of how to address risk in the organization.

Next, you’ll need to address how each risk will be handled. This might mean creating standard operating procedures around what to do in a fire. It might mean creating checklists for certain departments like the cleaning crew to ensure they put out signs when the floors are wet. Perhaps it’ll contain policies on creating a harassment-free work environment or best practices for IT to reduce the risk of cyber attacks. You’ll describe how to handle each and every risk.

4. Link risk management to other business components. 

In your risk management plan, you should include a description of how risk management is linked to strategic planning, financial management, and other aspects of running a business or organization. Basically, link the risk management plan to key parts of the business. This might require thinking about how your bottom line would be impacted by a personal injury lawsuit. It might require considering how to incorporate training for all staff into your processes. Risk management is an ongoing process that you’ll want to keep track of throughout your plan.

Another aspect of this is to consider how your risk management ties to performance, communication, monitoring staff, and reporting. Integration of risk management with other processes is a good way to ensure that your risk management is actually effective.

5. Incorporate hard data.

Knowing the numbers is imperative when it comes to risk management. You can’t just guess. You need to know things like how many staff work for you, how many floors are in your building, and how many computers and servers you have. Data like this is important to help you evaluate a variety of risks. It’s too easy to say that you need a certain insurance policy or that your computers need a new antivirus software without being able to quantify what that looks like. Incorporate hard numbers in your risk management plan to ensure you make impactful, strategic decisions.

6. Involve key stakeholders in the process.

While it may seem simple to create a task force or a risk management department to create the plan, you need to involve other key stakeholders from different departments to give input. The most robust and useful risk management plans are the ones that take key risks into consideration. You don’t know what you don’t know. However, the people who work their jobs every single day will be well versed in what risks you could anticipate that should be included in a risk management plan. This includes management and lower-level staff, suppliers, customers, and even regulatory agencies.

7. Create a process for developing responses to identified risks.

Once you have all of the information, you can develop mitigation and prevention strategies that can lower risks in each of the identified categories. This can include training procedures, insurance policies, and best practices for protecting data and technology. It may also outline who is responsible for managing each risk.

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