What is a risk management strategy?
Risk management is processing, identifying, and managing legal, financial, and security risks to a company's earnings and capital. The idea behind risk management is to have a plan in place should a breach in your organization's security occur. To manage the risk before it happens is to be prepared for any potential problems, both legal and financial, and in case of managerial errors. The risk management strategy varies depending on the organization's needs, but it must be within the legal, ethical, internal, and social regulations. So, what is a risk management strategy? Well, it is a strategy that addresses, monitors, and assesses risk to protect the organization's assets.
What do we mean when we talk about "risk"?
Let's first talk about what "risk" is; there are a few definitions of risk, such as financial, data, natural disaster, and many other types of risk regarding a company's security. For example, suppose there is a liability to your organization; that could be considered a risk. So financially, socially, ethically, and contractually, you will want a risk management strategy in place to protect your company. Risk management is important for handling risks. Most organizations have to deal with oftentimes preventable risks and external threats, so it is better to be prepared for any risk that could come your way.
What kind of risk should I be aware of?
There are many types of risk to be wary of when it comes to your business, so here are a few things to look out for. Financial uncertainties, technology issues or failures, legal liabilities, strategic management errors, on-site accidents, and natural disasters are all kinds of common risks that risk management handles frequently.
Why is risk management important?
Risk management is so important to a company's potential well-being. Risk management assesses potential risks to the company's assets and helps to protect them from internal and external threats. It is always better to be safe than sorry when it comes to your company, so having that level of protection is important. It is best to have a strategy in place in case of an emergency to protect your company's data from harmful risks.
What is a risk management framework?
The risk management framework is a template companies use to provide a process that connects privacy, security, and management to the company's system. It is essentially a framework made up of tools and references set up for decision-makers to base their next course of action on how to manage the risks they may encounter. It may look different for every business, but it can contain strategies, plans, models, and processes for the company to follow should a situation arise where proper action is needed.
What is risk tolerance, and how does it apply to risk management?
Risk tolerance is all about the amount of risk you are willing to endure in a given situation. It is about having the right recourses set in place to be able to absorb the "tolerated" amount of risk. Risk tolerance means having the recourses ready and available when the risk or loss occurs. When it comes to risk tolerance and managing risk, these go hand in hand. When deciding on how much risk an organization is willing to tolerate, you must have the right recourses and plans in place. We know some risk is unavoidable, and this falls under your management responsibilities. Risk tolerance must be calculated and prepared for in your risk mitigation strategy as this is considered a residual risk.
How can I identify and assess potential risks?
Risk identification is when you detect, describe, and catalog all kinds of potential risks that could happen to your business. Risk assessment is when you estimate the likelihood of the risk occurring and calculate the potential impact should it occur. You will want to consider both quantitative and qualitative costs when assessing. Then you will want to determine how you want the damage to be managed and add these plans to your risk management portfolio.
What tools and software are available to assist with risk management?
There are many tools and software available to help with risk management, such as ClickUp, Risk Cloud, Vendor360, and so many more. These are all available online and can assist you in assessing your risk management. There are many great recourses online, so we recommend doing your research and finding which source helps you and your business best.
Do I need a team to handle risk management?
While it is not necessary to have a team dedicated to risk management solutions, it is highly recommended. Having people from different departments help with potential risk assessment would be a great way to ensure the risks are contained and handled efficiently and in a timely manner. Assembling a risk management team may be the best way to assess, prepare, and execute your risk management plans. It is also a great way to ensure that nothing is missed and that every risk is assessed and prepared for.
Can my IT team take care of this?
If you do not have a risk management team, talking to your IT team about putting risk management software in place would be a good idea. Since they are familiar with the software and data you are trying to protect, having them on top of the system can help to keep everything monitored and in check. Having IT manage your risk management is a good alternative to having a risk management team for many reasons. As long as they can correctly manage and assess potential or existing risks, you will be good to go.
How do risk avoidance and risk reduction differ from each other?
While they are both risk reduction strategies, they differ in a couple of ways. Risk avoidance means you're doing your best to avoid any compromising risks to your company—such as financial risk, security risk, operational risk, and health and safety. These are all things that you can actively try to avoid, as some of these risks can be reduced by careful planning and strategy. Risk reduction is a way to control the damages made to your business, like claims or losses. Some great examples of risk reduction include having insurance for your business, having a good cyber security system is another form of risk reduction, and being able to protect your data and vital information with the help of software and your IT team's advice. All you're trying to do here is prevent the likelihood of a breach in your security by practicing risk avoidance.
What are some common risk management strategies?
There are five basic risk management techniques: Avoidance, retention, spreading, loss prevention and reduction, and transfer. Identifying the risk in tasks, your finances, as well as the overall well-being of your business, is another great strategy. You will want to consider everything that could be a potential hazard—your location, for example. If your area is prone to floods or tornados, you will want to be prepared with insurance, or if you have the use of equipment, you might want to get those insured as well. You will also want to keep your data and cyber security protected, so make sure you have a good cyber security system in place. The examples go on, but it is best to go through every aspect of your business and list out all the potential risks and establish a risk management plan.
How can I create my personal risk management process?
Here is a step-by-step, basic idea of how to create a personal risk management process,
1. Identify potential risks
Before putting anything down that's concrete, you will want to assess any potential risk to your business. If you are still unsure of everything to look for, we recommend doing some research and really making sure you have considered every possible risk that applies to your business.
2. Create a risk assessment plan
Now that you have gathered all the potential risks, it's time to organize and categorize them from least likely to most likely, or as another option, from low risk, moderate risk, and high risk. After that, categorize them by the impact they could have on your business low impact, moderate impact, and high impact.
3. Assign ownership for each potential risk
If you have a team, assign each team member a risk management segment. With their designated assignments, these team members will be responsible for jumping into action should their assignment need it. In addition, having team members assigned to individual risk assignments is a great way to ensure constant coverage for each potential problem.
4. Create responses
Having pre-prepared responses for these problems is the best way to practice risk management. The assigned owner of each task should refer to the risk assessment plan and respond accordingly to the problem. As you decide which plan to go with, you will want to decide which response best fits.
To change your plans or eliminate the risk altogether
Assign the plan to a different team member, or outsource it entirely
Take the necessary steps to alleviate the problem or lower the impact
Allow the risk, and adjust for its impact and the consequences that follow.
5. Continuously Monitoring the risks
Now that you have planned, prepared, and assigned for the risks, you will want to watch for them constantly. Having these risks monitored helps you to be prepared for the events to take place.
How can RiskRecon help me?
RiskRecon, a Mastercard company, can help you assess and predict risk, then develop a response plan. RiskRecon can also help identify strategies that work best for your company's risk management. When working with risk management, you need to have access to the best data to assess and help eliminate risk. RiskRecon can also set you up with cybersecurity solutions that can protect you against any cyber risks that may threaten your company. Contact us today to find out how we can best help you with all of your risk management needs.