A good Risk Management plan helps to ensure the continuity of your business. While it is unrealistic to expect that drawing up a Risk Management System will shield you from all risks, it is comforting to know that it will at least protect you against most risks. It is also important to remember that every Risk Management System has to be periodically reviewed and updated to cater to growing and changing business needs.
The success of a Risk Management plan requires a business owner to comprehensively follow the steps laid out in the system and practice strict adherence to the rules. A good Risk Management plan should include the five steps below:
- Identifying Risks: These risks could be due to potential liability, fire or forces of nature, risk of obsolescence, competitive products or theft (of tangible as well as intangible material).
- Quantifying Risks: Identified risks need to be quantified in terms of potential loss of, assets income and reputation caused by the actual loss, as well as further loss of income until the risk is contained.
- Formulating Strategies to Contain the Identified Risks: As has been said earlier, you cannot run a business without running a risk or taking a chance. What you can do, however, is to contain the risk so as to limit potential losses.
- Implementing Strategies: Strategies, no matter how good they are, are useless unless they are put into practice. Putting strategies into practice also helps to evaluate their usefulness and identify any shortcomings.
- Continuous Monitoring of Risk Containment Tasks: Risk containment tasks have to be constantly monitored to ensure that the risk that they present is tackled promptly and thereby minimized. Continuous monitoring ensures that the changing needs of the business are met.
Dave Gallen, CPIA- Bonding & Risk Management
610.898.6522 | Email