Introduction
All organizations, institutions, and facilities can be exposed to some risk. Risks can come at a time when they are unexpected, and unless there is a prior plan to stop the risk or minimize the impacts, then the consequences can sometimes be severe. Risks such as fire and accidents have been prevalent in many organizations causing huge losses and injuries. To mitigate such risks, organizations and government entities have to develop an appropriate risk management plan that will ensure risks are prevented from occurring, and in case they occur, the magnitude of the consequences are minimized. Risk management plan is a step by step instructional document which identifies and anticipate various scenarios which can put an organization to risk and then find ways and means of solving the problem. Risk management plan gives a summary of the risk management approach that has been developed by the risk manager.
Key Elements of Risk Management Plan
A well-detailed risk management plan has various elements that make the plan successful. The first element of a risk management plan is roles and responsibilities ( Pritchard & PMP , 2014). This is a component of a risk management plan that describes the leading and supporting roles in the management process. The risk manager usually has the overall role and responsibility for managing the risk. However, whenever the risk management team is too large, the manager can delegate some duties to another team member. For every activity in the risk management process, there is a leader, team members and support group who are usually the consultants. Once the roles and responsibilities of each member of the team have been identified, the whole process is initiated with each person knowing what role to play and at what level. A third party risk management team may also be included to perform a more independent, unbiased analysis of project than those from the sponsoring project team.
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Budgeting is the second element of a sound risk management plan. Planning for the risk management entails the use of resources. It involves the discussion of the budget for the risk management process. While it is always difficult to get an exact budget that will be used in managing risks, describing the process that will be used to determine a risk management budget estimate ( Lindell, 2013 ). The risk manager must use the right method to estimate the budget for the risk management activities. Under budgeting may make the whole risk management plan inefficient while over budgeting can be costly to the organization. A specialist is used to estimate a more accurate budget for the risk management activities.
Timing is also another component of a risk management plan. Every program must have a planned time when they are to be started. Timing defines when the initial risk assessment will be conducted ( Hristidis et al., 2010). It also identifies how often the risk management process will be conducted throughout the organization entire life. It is appropriate that the results be developed early enough to facilitate decision making. How and when the risk management activities will be performed is essential in developing a successful risk management plan. When deciding on the timing of these activities, there should also be a protocol for the application of contingency and management reserves. Without right timing for when to do what in the risk management process, the whole risk management plan is more likely to fail due to the difficulty that will be experienced in decision making.
Methodology is the next element of a successful risk management plan. This is where tools and data sources from the organization to be used in the risk management process are identified. The risk manager must define the scoring and interpretation methods that are appropriate for the qualitative and quantitative risk analysis being performed ( Cardona , 2013). Early identification of the methods is necessary as this will enhance consistency of the whole process. Identifying the right methodology and selecting the right tools and data sources within the organization is a critical step towards making the risk management plan successful. The next element in the risk management is communication. This is where the description of how the information on the risk will be documented and then communicated. These can include the communication and documentation of the risks themselves, the risk responses and the status of the risks. The risks have to be communicated to other members of the organization as well as the management so that appropriate action can be taken in advance. Effective and accurate communication is crucial in ensuring that the whole process of risk management is successful. Any miscommunication or wrong information may result in failures in the risk management process.
Risk management plan is also composed of risk categories. This is where risks are grouped into potential sources of risks on the project. This is usually in the form of risk breakdown structure. Understanding the potential sources of risks is significant in planning for the chance. Once a possible risk source is identified, the focus can be shifted towards mitigating that risk from the source point. Breaking down of risks into structures and sources help in grouping these risks into the degree of seriousness and impacts on the organization ( Arena, Arnaboldi, & Azzone, 2010 ). Risks need to be carefully and properly categorized and slated for effective organization of the information. The next element is the reporting structure and format. This involves a detailed description of how the outcomes of the risk management will be reported to the administration as well as other members of the organization. Appropriate reporting structure must be decided in advance so that there is effective communication of the outcomes of the whole process of risk management.
Also in the risk management plan components is tracking and auditing. This is where the documentation of how all the facets of risk management activities will be recorded for the benefits of the current organizational project, the future needs and lessons learned. A clear description of how the risk management processes will be audited is also contained in this document. Appropriate recording and auditing of risk outcomes and activities are essential in improving risk management process. This is aimed at improving the quality of the risk management process and enhancing the success of the whole process. The next element is the threshold. This is how one determines which risks are significant and warrant action upon. The project manager, client, and sponsor may have different levels of threshold. The acceptable threshold level forms the point of the target against which the team will conduct a risk analysis.
Steps in Developing Risk Management Plan
An organization must develop an effective risk management plan that will ensure that there are proper risk management and analysis. Developing a risk management plan require a thorough analysis and anticipation of the reports likelihood of the risks. It also entails mitigation or solution strategies that vary from high impacts risks to the low impacts risks. The goal of risk management plan is to prevent the organization from the severe consequences that result from unexpected emergencies such as fire. There are necessary steps that can be followed when developing an effective risk management plan. The organization through the risk manager and the risk team must follow these steps to ensure that the whole process of risk management is successful.
Identify the Risk and Create Risk Register
The first step in the development of an effective risk management plan is to identify the risk and create a risk register. Developing a successful risk management plan require identification of the possible risks and threats that the organization faces. An organization cannot solve a risk if that risk is not known. It is therefore significant that the risk is identified by collecting data in the risk register. Identifying risk can be done in many ways including brainstorming and discussion with the team members, stakeholders, and colleagues. The first step to identifying the risks of the organization is to define the categories that these risks fall into. These categories can be grouped into corporate risks, business risks, system risks, people risks and budget risks ( Drabek, 2012 ). Another method that can also be used to categorize risk during identification is by being risk being either internal or external.
All the risks that are identified are then written down in the risk register, and then a level is attached to each of the risks. The levels of the risk are based on the likelihood of occurrence of a particular risk and potential seriousness of the consequences. The risk register contains information such as unique identification of the risk, brief description, and level of impact on the organization, possible frequency of occurrence and the mitigation plan. The risk register also contains team members responsible for managing the risks and the budget that has been allocated to the risk management process. Assessment of the risks spans the whole organization including critical business units as well as functional areas. Effective risk identification is an essential step towards mitigating that risk. Failing to adequately identify all the possible risks that the organization can face is more likely to threaten the organization. Successful risk management plan depends on how well the team identified all the potential risks that the organization could face.
Risk Analysis and Evaluation
After doing risk identification and all the possible risks got into the risk register, the next step is to analyze and evaluate each of these risks that were identified. Analysis and evaluation can be done on the likelihood of the reoccurrence of the risk and the possible level of impact. This involves rating each risk identified in the risk register based on their possibility of occurring and the level of influence each can have on the organization ( Waugh, 2015 ). If some of the risks identified are fire and terror attacks, the risk management team can analyze and evaluate these risks by identifying the possibility of occurrence of fire and terror attacks and then analyze what could be the level of impact should these two emergencies occur.
Risk analysis and evaluation require the risk management team to do thorough research and gather enough information. However, the information to be used in the risk analysis is usually limited, and the data that is available can sometimes be too complicated to analyze. The two criteria that can be used to analyze risks include likelihood and the level of impact. The risk managers are usually required to rate the risks listed in the risk register on the scale of low, moderate and high likelihood of occurrence. At the same time, they are to rate these risks as low, moderate and high seriousness of the impact rate. This will enable the organization to understand which risks are more dangerous that require immediate attention for mitigation as well as which risks have high chances of occurring. A risk that is more likely to happen and has severe consequences should it occur will be given priority while planning to mitigate the risks. Risks with low chances of occurring and less severe consequences are given the last priority in the risk mitigation plan.
Identifying Risk Triggers
This is the step where the risk manager divides the team into subgroups who will take care of each of the risks identified to prevent them from occurring. These subgroups will have to study the risks in a broader sense and recognize the triggers of these groups and possible warning signs. The groups charged with fire as a risk can, for example, do an in-depth analysis of the whole organization to identify vulnerabilities that could cause a fire or which could increase the seriousness of the impacts should there be a fire outbreak ( Rosenau & Githens, 2011 ). This involves asking questions such as, is there fire extinguishers in all buildings within the organization? Are there mechanisms to prevent accidents from occurring? Are the employees and organization members well trained on how to respond should these emergencies such as fire outbreak occur? Getting an answer to such questions forms the beginning of identifying the risk triggers in an organization. If there is no fire extinguisher, then this becomes the first trigger of risk, and hence an immediate solution becomes necessary. Also, if employees are not well trained in how to respond to emergencies such as fire outbreaks, then this is another vulnerability that needs to be addressed by the team.
At this stage, the risk manager can divide the roles and responsibilities into each team based on expertise. The team to examine the areas of vulnerability for fore risk must be knowledgeable on issues of fore risk management and can be able to identify all the triggers of the risk. At the same time, the team assigned to oversee the possibility of terror attack must possess knowledge on the issues of terror. This will increase their chances of identifying risk triggers which could provide a loophole for terror attacks. After the risk triggers are identified, appropriate action can be taken by the organization based on the report of the team.
Identify Possible Solutions
This is the fourth step in the risk management plan. After the possible risks are identified, analysis and evaluation did and risk triggers identified, the risk management team should identify a possible solution to either stop the risks from occurring or minimize the impacts should the risk occur. The risk management team must identify what options are available for the mitigation of the risks identified so that they can be implemented ( Hopkin, 2017 ). Arriving at solutions require the team to sit together and brainstorm while at the same time giving each team member an opportunity to present their view. When the possible risks identified are for example fire outbreak, the team must identify what solutions are available for the organization to mitigate fire risks by either completely stopping such risks or minimizing the seriousness of the impacts should the risk occur.
Research is required to arrive at a solution that can be implemented. A look at the structure of the organization and the location can provide an idea of what solution can be implemented to stop specific risks from occurring ( Hopkin, 2017 ). For example, if there is no fire extinguisher in most parts of the organization, the first solution that the team can think of is to put more fire extinguishers. This will minimize the impacts should the risk occur. The second solution should then be to identify a solution that will ensure that such risks do not occur at all costs. It is always better to prevent a disaster from occurring than to react after it has occurred.
Create a Plan of Action and Implement Mitigation Strategies
Once the risks are identified, possible solutions and measures taken into account, the next step is to create an action plan and respond to the risk. An action plan involves how the identified possible solutions will be put into practice by the organization to ensure that the risks are minimized. The risk mitigation strategies will include either minimizing the chances of the risk-taking place or minimizing the impact of the risk should it occur ( Reason , 2016). Implementing the strategies to mitigate the risks require proper action plan, or else the whole process fails. An action plan entails a detailed process on how the organization intends to implement the strategies to mitigate the risks. If the risks identified are for example the possibility of a terror attack, the organization can consider increasing the number of security officers to improve security in the place.
Once the action plan has been put in place, the next step is to implement the solution so that the possible risk is avoided. If there were no fire extinguishers and exit points, then the organization should take the responsibility of putting more fire extinguishers and creating exit points for escape in case of fire. All the possible causes of fire such as default in the electrical lines should all be checked to ensure that everything is okay and in the right place. Mitigation strategies can either be preventive or contingency. Preventive strategies are aimed at stopping the risk from occurring while contingency is aimed at finding a way to respond to the risk should it occur.
Monitoring and Reviewing the Risk
This is the last step in the development of risk management plan. Risk monitoring and review is essential in ensuring that the strategies adopted by the organization are actually working to help prevent the risk from taking place. It is therefore critical that the progress of the strategies implemented be monitored and reviewed and make necessary changes if there is the need. The risk management team must consistently review and monitor the risk register that was put together while at the same time monitoring the plans put in place at the beginning of the risk management plan development process ( Reason , 2016). The purpose of risk management may vary from one organization to the next, with some firms aiming at reducing risks and preventing unwanted surprises and attacks. Despite the purpose of the organization, there is a large body of knowledge that provides information on the risk management processes. This makes it easy for the companies to adopt these processes to mitigate risks. There is sufficient information on monitoring and review of the risk management processes which the organization can always adapt to ensure the success of their plan.
Conclusion
Risk management plan is an essential activity for an organization with the aim of mitigating risks. It provides the organization with an understanding of the elements of the risk management which need to be taken into account to minimize the risks. The elements of risk management plan such as timing, budgeting, and risk category provide significant information to the risk management team on what is required of them at every level of the risk management process. The six stages that are essential for a successful risk management plan provides information on what is to be done at every step of the process to realize the goal of the risk management team. Without a proper risk management plan in place for an organization, it becomes difficult for the organization to anticipate and even control the unexpected risks which usually come with adverse impacts and losses to the organization.
References
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