Making a business successful requires hard work and extensive planning. Part of the process is coming up with a business risk management plan that will help steer the business around potential problems with a minimum of trouble. Having such a plan in place will streamline business processes and help make it more profitable in the long run.
What is a Business Risk Management Plan?
When a business is starting up, the owners and operators will often come up with a business plan that tells what the organization is, what it does, and where it’s going. This document covers all kinds of policies on how the business plans to conduct business. A business risk management plan is an important part of this document. It should detail what kinds of risks the company will face in the course of doing business and what the company and its employees will do to minimize or eliminate the sources of risk that have the highest probability of negatively impacting the company.
Coming Up with a Plan
Risk managers use a basic five-step process to come up with a business risk management plan. First, identify potential risks to the company. These may include financial, operational, strategic, physical and environmental, and other types of risks. Second, the probability of risks having an impact on the organization must be measured and the risks ranked in order of importance. Third, come up with ways to mitigate or eliminate the risks that are most important. Fourth, implement the plan. Finally, monitor the plan to see if it is effective or if it needs alteration.
What is in the Plan?
The kinds of risks that are included in the business risk management plan depend on the kind of business it is and how large it is. For instance, a company that manufactures medical supplies will have a plan that tells them how to minimize the risk of their suppliers not getting parts to them in time and how to maintain quality control. An investment company would include guidelines on how to minimize risks related to changes in the stock market. The important thing is that these companies think about what risks they might face and have a plan in writing for how to avoid those risks.
Other Risks to Businesses
Risks that all businesses have in common and should include in their business risk management plan are technology-related risks and employee-related risks. Technology risk management includes security of important data, information back-up, and data recovery. Employee risk management includes both the physical protection of employees and risks to the business because of employee actions. Ways to minimize the effects of employee error and illegal activities like fraud and theft should be included in the business risk management plan, as well.
Implementing the Plan
Once the business risk management plan has been created, someone has to oversee its implementation and monitor the business to make sure that it is being followed. Many larger companies have risk management departments or committees to oversee the plan and make sure that people are actually using it. Smaller companies may not have an entire department for this purpose, but may instead have a risk management officer or committee. In addition, individual departments are responsible for knowing the plan and making sure employees are following it.
Creating and implementing a business risk management plan is an important way to avoid business disasters. This will help the company be both more profitable and more successful.
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