Risk management is essential not only for legal compliance but also for safeguarding the assets and reputation of an organization. It needs to be inculcated into the very culture of the organization and become part and parcel of every employee’s daily duties. If this happens, management and staff alike will always consider the risks involved when making work-related decisions.
In this article, we cover the 8 steps to establishing a strong risk management program in an organization.
Execute a Risk Management Framework as per the Risk Policy
The risk management framework depends on a number of factors such as services being offered, issues with employees, regulatory/compliance commitments, issues with IT and Cybersecurity, and management of cash flow. Every organization is unique in itself and this goes a long way in shaping a risk framework that is unique to the needs of the organization.
Define the Organizational Setting
What is the aim and objective of the organization? What is the cultural, legal, and operational environment in which it operates? Who are the stakeholders?
This includes risks that are already there and those likely to occur. Potential risks come in the form of services discharged, contracts acquired, and performance risks.
Conduct an Analysis and Evaluation of Risk on a Perpetual Basis
Analysis and evaluation of risk classify risk into high and low categories for both internal and external risks. Internal risks may comprise employees, business location, reputational and technological threats.
Treat and Manage Risk
Based on risk levels and the available budget, come up with a plan of action that will address the identified risks. You may decide to accept risk, avoid risk, transfer risk and mitigate the effects of risk and. Some of the actions implemented in high-level risks include reviewing the specified areas, retraining of employees and reexamination engagements with clients.
Communicate and Consult
Communication and consultation are done both within and outside the organization, to ensure that all parties are in the know. This will help each party take up their roles and effectively play their part. For example, a client should clearly understand the risks involved in certain actions and the consequences that accrue in the event of noncompliance. This eventually transfers the risk to the client.
Regular Monitoring and Review
Monitor and review risk management action plan on a perpetual basis. As time goes by, new risks emerge, current risks increase/ decrease, some cease to exist, and the attention is given to each risk also changes. Regular monitoring and review are very important since they ensure that new risks are addressed as soon as they come up and the existing management strategies remain relevant to the risks.
Have a record of all policies, risks identified, and countermeasures designed to mitigate the impact of these risks. Keeping a record is important in ensuring that all policies and adhered to without any misunderstanding or misinterpretation whatsoever. Such documents serve as a quick manual on the plan of action and reference point to ensure that all things are done in a prescribed way.
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