What does risk management mean? Is it just identification, assessment and planning and controlling social, economic or physical threat to the organization? Is the concept only about transferring the risk or reduce its negative effects?
Well, the answers for the above questions is â€œnoâ€. The process of risk management is not only restricted to controlling the threats or reducing their negative effects. It is a much deeper concept that also involves risk avoiding as well as risk taking. Every work involves some or other kinds of risk. Sometimes you avoid, sometimes you control the phenomenon and sometimes you simply let it come. Same is true for the business world.
The idea behind is that there are no hard and fast rules. This means that even though we have a systematic approach to treat risk it is not necessary that this is going to help. Simply designing and implementing a risk management plan is not enough to treat risk. It depends on firm-to-firm and industry-to-industry. There are various other criteria that need to be analyzed such as internal and external environment of a company, companyâ€™s ability to develop and implement a risk management plan effectively.
There are various other issues that need to be addressed. Before you spend your time, efforts and money, see if you really require a full-fledged risk management plan to control the financial, physical or social threat to the organization. Deeply examine your requirements and need to treat the risk. Sometimes, avoiding risk is considered as the best strategy.
When you decide about a risk management plan, you need to examine thoroughly and ask yourself few questions before proceeding further. These questions act as an eye opener and provide you with the outline of what you need to do and what to look at. Read further to know what you should ask yourself while designing, developing, implementing or reviewing your risk management plan:
Do You Actually Need a Plan: This is first and the foremost question that you need to ask yourself. Thoroughly examine the situation and decide if you actually need a risk management plan.
Is the Plan Feasible: This is really important to checkout if the prepared risk management plan is feasible or if it is possible to bring it to life. Also check if it suits your requirements or not.
What Are the Strengths and Weaknesses of a Risk Management Plan: Conduct a SWOT analysis and try to find out the strengths and flaws in the plan. Remove the flaw before hand so that you get desired results after implementing it.
Does It Meet Your Objectives: The biggest requirement for a risk management plan to be successful is that it should meet your companyâ€™s objectives. Try to match the firmâ€™s objectives with planâ€™s objectives.
Analyze If Risk Needs to be Treated: Carefully examine if you can avoid the risk or not. There is no need to develop a full-fledged plan if you think you can avoid it. It is not at all necessary to treat the risk always. It depends on the severity of a situation.
Check If a Plan is Backed By Clearly Defined Activities and Events: A risk management plan should always be backed by clearly defined activities and events otherwise it may cause problems in long run.
The golden rule for the success rule of a risk management plan is that there is no golden rule. Each firm is different and faces different types of risks in different business environments. You need to develop a unique plan for your firm to manage the risks efficiently and effectively.