Choosing a Risk Management Plan

Choosing a risk management plan is an effective way to prevent various damages and losses. Read about choosing a risk management plan for your business.

Running a business requires the ability to prioritize responsibilities and anticipate problems before they happen. Managing risks is therefore essential to the longevity and overall success of your business. Choosing a risk management plan created for your company’s specific needs is a proven and effective way to prepare for financial, legal, strategic and natural disaster-related problems. Creating a risk management plan also provides multiple benefits for your business including a safe working environment and the protection of vital resources. Read ahead to learn valuable information about choosing a risk management plan for your business today.

Risk Management 101

Risk management plans include the identification and assessment of risks to various aspects of your business. Risk management plans/processes also involve preventing risks entirely when possible. When absolute risk prevention is not possible, a high-quality risk management plan also includes methods for mitigating any damages incurred. 

Every type of business faces a variety of threats and potentially hazardous situations. Certain issues are foreseeable as potential threats from your company’s inception. Some develop over time, while others appear suddenly as your business grows/expands. Understanding the top risks facing your business in modern times and how to plan for their potential impact bolsters the longevity and ultimate success of your company.

Things to Consider When Creating a Risk Management Plan

A solid risk management plan is effective because of two main contributing factors. Preparation and the content included in your plan are both vital to its success. These two primary factors are also reliant on each other for each to be fully successful. For example, the quality of preparation entailed when creating your plan is dependent upon the accuracy and amount of information used to create your strategies. Information, on the other hand, is often ineffectual without organization and preparation. 

Consider what has the potential to go wrong with and for your business. Identify risks such as potential accidents, financial weaknesses, and weather-related threats in advance to prepare for their occurrence. Analyze each identified risk and assess its potential impact. Assign a low, medium or high probability rating to each risk and organize/prioritize accordingly. 

Risks are prevented, mitigated, transferred, shared and/or accepted. The control and treatment of risks is also vital to consider. Risk control involves prevention or recovery from losses. Risk treatment involves direct, preplanned methods of paying for damages caused by risks once they occur. How you and your business approach risk management is heavily reliant upon your ability to recognize the top risks your company needs to manage today. 

Top 5 Risks Your Company Needs to Manage

Many of the risks your company faces today are similar to those faced historically by businesses around the world. Some risks are prevalent due directly to advances in technology and the opportunities these advances present to cyber criminals. Increased reliance on technology also increases the risk of technical and digital-based errors. Other risk factors such as weather are simply beyond your control to prevent, forcing you instead to mitigate damages when incidents occur.

1. Financial Risks

Financial threats are perhaps the most common risks faced by the majority of businesses in various industries around the world. Financial risks are present due to economic downturns, general market fluctuations and sudden changes in consumer trends. Employee and third-party theft or embezzlement are also prevalent financial risks. Poor financial planning and/or the lack of effective market strategies also put businesses at risk of failure and therefore require risk management for prevention and mitigation purposes.

2. Injuries

Injuries are possible on your property at any moment during active business operation. Staff members, clients and customers alike are exposed to possible falls and multiple other incidents resulting in injury or harm. Risk management implements protocols to prevent injuries but also manage scenarios effectively and in compliance with applicable regulations when accidents happen.

3. Weather/Natural Disasters

Every building structure is at risk of damage from severe weather and the occurrence of natural disasters. Your business location and understanding of common local weather patterns helps implement proper protection strategies into your plan. Earthquakes, floods, tornados/hurricanes and more must also be accounted for as applicable to your location.

4. Contractual Risks

Contracts are important, necessary parts of doing business today. Despite the security contracts provide, sometimes they are broken in bad faith or because one party suffers significant setbacks beyond his/her control. Risk management creates backup options to cover holes and solve problems created by broken contracts, allowing your business to continue operation unscathed.

5. Cyber-Crime and Technical Risks

Cyber-crime has increased in frequency since consumers and businesses began utilizing online/cloud-based services for everyday needs. Preventing hacks, breaches and data theft requires structured planning and, for some businesses, an entire department dedicated to cyber-risk prevention. Technical errors also happen in modern times. Backing up company data and supplying the power and storage space required to properly run your business is an essential part of modern risk management planning in 2021.

Benefits of Creating a Risk Management Plan

Benefits of creating a risk management plan include the protection of physical and financial assets. A safe and secure work environment is established via risk management-implemented protocols. Creating a risk management plan potentially lowers your business insurance premiums by reducing the need for filing claims. Risk management also helps keep your business in compliance with applicable rules/regulations, which prevents fines lawsuits and unexpected closures. Additional benefits of creating a risk management plan include:

  • Increased business stability.
  • Increased investor appeal.
  • Decreased legal liabilities and ramifications.
  • Resulting stability attracts higher quality applicants.
  • Protects against environmental damages.
  • Provides an edge over competition. 

Risk Management Guides and Templates

Credible risk management plan guides and templates are available for free from sources such as the Centers for Disease Control and Prevention (CDC) and Smartsheet. Professional risk management companies such as Finserv AI and Greenlight Guru provide risk management services and in-depth software programs. Additional risk management guides, templates and software/service providers include: