Preventing and mitigating risk is likely going to cost both money and time; figure out how much you are willing to pay, based on your assessment of the severity, likelihood, and impact of each risk. In this section, you’ll also consider the frequency of risks to map a schedule of when you are most likely to encounter the risk and how it fits into your project timelines and fiscal schedule If you are encountering risks that are high impact, high likelihood, and high frequency, these are likely also going to be a higher cost to your organization.
A risk register is simply a table or log that integrates your risk assessment matrix with additional information related to each risk — it includes the severity, probability, frequency, and impact of each risk; the risk owner; the type of response necessary; and a place to record updates and the results of periodic internal audits.
An effective risk management plan is well structured, systematic and helps you to mitigate risks. Read on to learn seven core steps you can take to create a risk management plan that you can adapt to any project or enterprise:
Take stock of the risks your organization may face by brainstorming with stakeholders; each stakeholders should consider risks related to their role. This is where you’ll want to define your risks, examine your assumptions, open lines of communication between stakeholders, and lay all possible risk-related data on the table, so that you can uncover the hidden risks to your work.
Risk outcomes can generally be measured in dollars, but the method of measurement will also depend on the context; measuring the potential risks of an earthquake to a structure will differ from measuring the risk of employee fraud, for example. Measuring costs and consequences to each risk can help you determine how comfortable you are taking certain risks and what your risk thresholds are.
Once you have identified and measured your risks, you’ll draft a risk assessment plan, which includes your risk matrix, qualitative and quantitative analyses of all data related to each risk, an overview of the loss controls which address or mitigate these risks, and evidence supporting your plan for designing and implementing each control.
Based on the risk assessment, each risk should be assigned a risk owner who is responsible for keeping track of and responding to that particular risk. Risk should be assigned based on the owner’s role in the organization or project. Record which risk belongs to which owner in your risk register.
The first step in mitigating risk is identifying any preemptive or preventive measures you might take to reduce or eliminate risk. Implementing controls will help you get ahead of inherent risks and minimize residual risks. Controls include eliminating the source of the risk, deciding to alter or halt an operation to avoid the risk, and distributing the risk across multiple parties or organizations. You might also consider if it is possible to minimize the impact, likelihood, or frequency of a risk event. Your organization may also choose to accept, or even escalate, the risk to take advantage of an opportunity.
As part of your risk assessment matrix, create a contingency plan that provides detail about the steps that risk owners will take to address or respond to their assigned risk(s). What actions will they take? What documentation is required for them to take these actions? When creating a risk management plan and contingency plan, include the structure for this response and template documentation ahead of time, so that it is ready to roll as soon as a risk manifests in the real world.
An effective risk management plan includes a schedule for regular audits to identify, assess, and mitigate new threats and risks, adapting the plan as the company’s needs, scope, and scale evolve. An internal audit schedule will help you keep on top of the both internal and external fluctuations, continually improve your operations, avoid liability, and make sure you are pursuing the right opportunities.
Some best practices for maintaining an effective risk management plan include the following:
Risk landscapes can change on a dime and a project or enterprise can encounter a new risk any time it branches into new territory or releases a new project. As you consider how to make a risk management plan that is right for your project, it is worth your time to invest in risk management software to help you keep track of your data and integrate response documents and action-plans. AuditBoard’s risk management software is a robust tool for risk management designed for all stages of the risk management journey, whether your organization is just starting to navigate risks or is already part of a mature risk environment. Get started with RiskOversight today!