How to Create a Risk Management Plan for Your Business

Business is risky. It always has been and forever will be! Need proof?

A whopping 45% of new businesses fail within 5 years.

Remember, success demands innovation and innovation involves risk. Play it too safe and you’ll struggle to stand out, solve problems, and grow in perpetuity.

Then there’s economic uncertainty, market shifts, and technological changes to think about. Throw in the potential for theft, cyberattacks, and human error, and business risks can seem ubiquitous. That’s why creating a business risk management plan is so important.

Want help with the endeavor? Keep reading!

Brainstorm Possible Risks

You can’t protect yourself against an unidentified enemy.

As a result, the first step to running an effective risk assessment is identifying the risks themselves. Only then can you take effective action to prevent them from occurring and/or mitigate their impact.

Start by sitting down as a team and brainstorm any potential risks you can foresee. They could be internal, external, financial, strategic, operational, or environmental in nature. Whatever the case, creating a list of everything that could possibly go wrong is an important place to start.

Assess the Risks

Not all risks are created equal. For example, a customer is more likely to make a complaint than a hurricane is to strike; an employee is more likely to trip over in the office than a cyberattack is to happen. Yet both the hurricane and the cyberattack would have more disastrous ramifications…

You know the risks. Now it’s time to assess them. To be more precise, it’s time to identify a) their likelihood and b) their impact.

The results of this assessment will help in numerous ways. First and foremost, you’ll be able to prioritize. After all, a probable risk that would have serious implications requires more urgent consideration than anything improbable and unserious!

Deal With the Risks

The next all-important step is to put a plan of action in place around each risk. Starting with the most urgent, ask yourself how you could reduce or eliminate the threats. What actions could you take now and in the future to alleviate the issue?

Put contingencies in place. Assign strategic roles to specific people and ensure they understand them. Then write up your plan and distribute it around the organization.

Review and Iterate

The best risk management plans are never ‘finished’.

After all, risks change with the times and it’s your job to remain on top of the situation. Always keep your eyes open for new threats and educate yourself on how to handle them. Then take whatever you learn and update your risk plan!

Try to learn more about enterprise risk management while you’re at it. This industry changes too and best practices alter with them. Staying up to speed is sure to help your business survive and thrive over time.

Time to Create a Risk Management Plan

Anybody who runs a business is surrounded by risk. And, unfortunately, countless companies close down every year because they fail to put a plan in place around them. We hope the information in this post will help you avoid the same fate!

Keep these steps in mind and you should have an effective risk management plan in place in no time. Would you like to read more articles like this one? Search ‘risk’ on the website now.