A risk management policy detects, identifies, and defines potential risks to prevent or minimize their impact. Based on the past outcomes and incidents as well as predictions for the future, the risk management policy is designed to help a business or an organization develop a suitable strategy for limiting and handling risks.
The policy goes beyond the rules of governing bodies. It can incorporate risk management rules developed by the business or organization. The customizable nature of risk management policy allows companies to personalize the document according to the risks they encounter in their line of work.
Considering that the policy helps businesses and organizations to perform without roadblocks and grow their business, how you write the policy matters.
The more detailed the policy is, the potential for incidents and undesirable outcomes will lessen. Therefore, follow these key steps to write an impeccable risk management policy.
1. Identify Potential Risks
First, you should direct your efforts to identify potential risks. Consider any type of risk that could affect your company or organization, your work, employees, or stakeholders.
You can observe the risks from two aspects:
- Internal (financial risks, strategic risks, organizational risks, operational risks, compliance risks, etc.)
- External (environmental risks, pandemics, natural disasters, etc.)
Collect information about potential risks through interviews with employees and managers from different segments, brainstorming, and analyzing the validity of certain assumptions.
Once you draw out risks that could realistically endanger the work of your business or organization, segment them into sections. Within each section, define the stated risks.
2. Evaluate Past Incidents
The incidents your company or organization has faced can serve as lessons for prevention. Refer to your records to pull out this information.
Put your focus on the following:
- The incidents that occurred
- What led to those incidents
- The consequences
- How the incidents were handled
By analyzing past incidents, you can identify what type of risks threaten your business or organization.
If you need help with the research and incidents summary you can refer to research summary writing services for help. Their expertise in research and concise presentation of the findings can save you a lot of time.
3. Assess the Risk Probability, Impact, and Consequence
Once you’ve identified potential risks and reviewed past incidents, you can dive into analyzing the risks’ probability, impact, and consequence.
In terms of probability, you want to evaluate the chance for the risk to occur or re-occur. Consider your organization’s practices, history, and work methodology to define probability.
Based on probability, the risk can be:
- Rare
- Unlikely
- Possible
- Likely
- Almost certain
The impact refers to how the risk will affect the organization or business. According to ALS Global, there are five levels of risk severity:
- Insignificant
- Minor
- Moderate
- Major
- Catastrophic
The impact and likelihood help you to outline the consequences. Look back to past consequences as well as your predictions of the potential risks’ outcomes.
4. Methods of Prevention and Treatment
The clearly defined risks allow you to develop methods of prevention and the treatment plan.
Write down step-by-step instructions for the following:
- How to avoid risks
- How to fix the outcomes when the incidents happen
- How to document the incident that occurred
The prevention should provide employees, stakeholders, and everyone involved comprehensive guidelines on directing their actions to minimize risk potential. Based on the prevention methods, you can employ better practices within the company or organization.
On the other hand, the treatment plan will consist of preplanned actions to mend the incidents. While you can prevent some risks, others are bound to slip through. Therefore, each potential incident should have a developed method of treatment.
What you should also write down is risk prioritization. If more than one incident occurs, how should you prioritize them?
To design the list of priorities, refer back to probability and risk severity. The risks with catastrophic consequences with a high level of probability should be a priority.
5. Delegate Responsibilities
Risk prevention and treatment won’t be possible without individuals who’ll handle those processes. Therefore, the next step is to delegate responsibilities and assign roles.
Put together a team of people or assign individuals to pay attention to warning signs. Their role can be to watch out for incident triggers and employ prevention strategies.
You should also write down who will be responsible for putting in action the treatment plan if incidents occur.
Delegating responsibilities and assigning roles is important because you need immediate reaction if there is a threat or incident. Also, the holders of risk management policy will know whom to contact if they come across a threat or find themselves in a risky situation.
6. Estimate the Costs
Calculate how many funds you’ll need to prevent and treat outlined risks and incidents. Having a cost plan will ensure that your company or organization can employ measures you stated as necessary.
You should also consider the resources you need to allocate to teams and individuals responsible for risk prevention and treatment. They need resources to act on set recommendations in the policy and introduce necessary changes.
7. Monitor the Risks and Report the Outcomes
Risk management policy needs to be continually revised and evaluated. Based on the reports you get from the evaluation, you’ll know how valid your prevention and treatment plans are.
You can use tools for monitoring risks, create a data tracking system, and put risk assessment forms in use.
The more you invest in assessment and improvements, your lower the risks.
Conclusion
Following these steps will help you write a risk management policy that covers it all. Just approach the policy writing with detail and patience. Also, remember that both internal and external risks evolve. Thus, a policy needs to be a living document capable of change.
Author’s bio. Jessica Fender is a copywriter and blogger at SpeedyPaper with a background in marketing and sales. She enjoys sharing her experience with like-minded professionals who aim to provide customers with high-quality services.
