The heart of risk beats with uncertainty. Uncertainty lies in what could occur, where it could occur and what the results could be. By having a risk management framework reduces uncertainty for your risk profile, risk perception, risk tolerance and risk weighted assets. All risk management processes generally follow the same basic steps, although sometimes different jargon is used to describe these steps. Together these 5 risk management process steps combine to deliver a simple and effective risk management process.
Step 1: Identify the Risk. Risks are uncovered, recognized and described as soon as possible.
Step 2: Analyze the risk. Once risks are identified you determine the likelihood and consequence of each risk. You develop an understanding of the nature of the risk and its potential to affect project goals and objectives.
Step 3: Evaluate or Rank the Risk. You evaluate the risk magnitude, which combines likelihood of what could happen and consequences that could be incurred if it did happen. You make decisions about whether the risk is acceptable or whether it is serious enough to warrant treatment.
Step 4: Treat the Risk. This is where risk response occurs. During this step you assess your most sever or highest potential risks and set out a plan with reaching an acceptable risk level being the goal. By having risk mitigation strategies you have a step by step plan to prevent and reduce negative impacts on your business.
Step 5: Monitor and Review the risk. Once a risk has gone through all the steps and has been mitigate or eliminated does not stop it from coming back as a future risk. This is why their should be periodic maintenance. The frequency of the maintenance depends on what is put in place and the risk(s) potential.
A risk management plan does not necessarily just deal with negatives. It also has the potential to provide opportunities. A great example of this is cameras. Security cameras do serve as a great deterrent for would be internal and external thieves or vandals. These business camera systems also serve as devices that will reduce your liability and shelter you from negligence. Instances where this happened are slip and fall cases, active assailants and customer on customer theft. In summary, a risk assessment plan allows you to identify and deal with risks to any part of a business and/or facility. It also plans how to react, reduce and recover for the smallest to the largest risks that you face or potentially face.