Seven Winning Steps to Risk Management Planning for your Twin Cities Organization
Every organization has risks. For a business, no profits would ever be realized apart from acceptable and manageable risks. Non-profits could never grow and carry out their mission without certain accepted risks. But, unwanted and unexpected risks often cripple organizations when they have not practiced good risk management procedures long before the unimaginable occurs.
Risk management planning for your Twin Cities organization can guarantee you are best equipped to survive and even succeed during such unforeseen occasions. Regardless of how small a business may be, it needs an active risk management committee with a sound plan. Here are seven winning steps to Risk management planning for your Twin Cities organization.
1. Define What a Risk is for your Business
If you are a manufacturer, injury is an obvious risk for your business. If your organization relies heavily on large amounts of data, computer system and infrastructure failure is a definite risk to consider. The most efficient and reliable way to define risks unique to your business or organization is to ask and answer pertinent questions.
- What might cause a sudden loss of revenue?
- What would happen if your municipality radically changed property taxes?
- What would happen if building and safety codes were suddenly changed?
- How could unethical or illegal acts impact daily operations?
Answers to these questions and others like them will help you compile a comprehensive list that defines the risks associated with your operations.
2. Categorize Risks
The risks you discover will naturally fall into certain categories: employees, board of directors, management, data, technology, physical property, products or services, customers, etc… As more risks are identified in the future, these categories serve to keep risk management current.
3. Identify Unique or Specific Risks
This step of risk management moves from general to specific. As before, specific questions that provide specific answers will enable you to identify specific risks. What if the CEO is faced sexual harassment charges? What if you unexpectedly lose your best customer? What if a tornado wipes out your production facility?
Write down every possibility, however seemingly unlikely they might be. The risk management committee should brainstorm these questions and ask and answer as many “what ifs” as possible.
4. Rank the Risks
Risks can be ranked from uneventful to catastrophic. Low-level risks are often found to be unprofitable to consider preparing for. If there has never been an earthquake in your region, specific planning for earthquakes is too costly compared to the extremely remote likelihood of one occurring. Other events, though they have never occurred in your business, are still potential realities. While a sexual harassment charge has never been made in your business, they are still common and therefore must be considered as a higher level.
5. Determine Strategies to Reduce Risk
Start with catastrophic and likely risks and addressed them first. When possible, devise multiple strategies for each specific risk. This is the point in planning where you should determine who in your organization is best equipped to handle each category and level of risk. It is also the place to consider your budget and address the need for allocation of emergency resources. If there is not a category in your budget for emergencies, you have just identified a catastrophic risk.
6. Write in Down and Pass it Out
A risk management plan needs to be comprehensive but it must also be workable. If employees cannot understand and follow it, the plan is worthless. A draft of the plan should be distributed to key people in every department. Enlist their feedback to ensure the plan is marked by common sense and usability.
7. Test and Revise the Plan on a Regular Basis
As a business or organization grows, things change. What wasn’t a high risk a year ago may be next year. However diligent the risk management committee was, weaknesses in the plan become obvious over time. At least once a year, kick the wheel of that plan and make sure it still can be relied on to carry you through the unexpected.