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8 Steps To Establish a Risk Management Framework

In this article, we will be looking at what risk management is, what the benefits are, and what steps to take to build a risk management framework.
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8 Steps to Establish a Risk Management Framework

To get ahead in business, sometimes you have to take on strategies and business practices that would be considered risky. As you know, not taking any risk and always playing it safe can be as detrimental as taking risks. 

Take Nokia, for example; they were once the largest phone brand in the world. But, they feared that Android would not catch on and refused to add it to their systems. Look what happened. 

But unlike Nokia, many business people are looking for ways to take on precarious opportunities without overexposing their positions. And because of that, are looking for the best strategies or risk management systems to help them. But with so many self-help services on the internet, it's hard to pick a winner.

At Accountable, we are a risk and compliance SAAS company that helps businesses with all things data security. We are also available to offer risk management services. We've helped hundreds of companies mitigate risks in their operations. And a few more make calculated moves to increase their bottom lines as we'll do for your business.

In this article, we will be looking at what risk management is and the steps to take to build a risk management framework. So take out your notepad, and keep on reading to learn more. 

What Is Risk Management?

Risk management is recognizing, evaluating, and managing hazards. It minimizes exposure but maximizes the realization of opportunities. 

Hazards can exist in all forms ranging between income uncertainties, legal liabilities, and cyber threats. Mistakes by the management teams or even workplace accidents and natural disasters are also classified as risks. 

Businesses have adopted risk management protocols to help them avoid and mitigate risks and hazards. These protocols test the landscape and set standard operating procedures to deal with any potential danger. They ensure that businesses can run in changing conditions without operations changing significantly. 

The consistency and secure positioning a risk management framework provides, helps your staff and allies instinctively avoid overexposing your business. It also helps them be more conscious of risk in their decision-making processes, further reducing your exposure to risk. 

The Benefits to Emphasizing Risk Management

Effective Strategic Planning

A risk management matrix empowers you with information about critical aspects you need to consider before making any plan or decision. Knowing exactly where everything lies in relation to what you're trying to achieve will show you what you need to do to be successful. 

Better Cost Control

As we had mentioned, having protocols for avoiding and mitigating risks will help you plan for the future. Having a rough estimate of how much it costs you to deal with an event's occurrence will help you save and anticipate such events. 

An integrated approach to risk management will also help you evaluate new clients in your engagement process. Not all clients will tick all your boxes, and it's important not to turn away the ones who come with some risk attached but have a high chance of a good upside. Your risk management framework will help you evaluate the extent to which taking on risky clients is worth it.

Increased Profitability

Conducting good business is anchored on a few principles. One is finding what is working and doing more of it. An integrated approach to risk management will help you mitigate your downside and capitalize on your upside. It will also help you get better clients and gain better quality control over your deliverables. Improving your efficiency, quality, and profitability.

Reduce Litigation Risks

Your risk management framework sets out processes that have already been tested and proven. Applying the same approach to every project will reduce litigation risks by reducing the possibility of missing an essential step or getting something wrong in your documentation or process. We are creatures of habit, and once we learn a good technique to do something, it's pretty hard to get it wrong afterward.

Better Risk Comprehension

The more you deal with the same risks, the more you learn about managing them or even using them as opportunities. Therefore, risk management can also provide opportunities because the risk is a problem that has no solution. If you can find its key, you can save money from eliminating it or make money from solving it for others. 

Smooth Operations

Dealing with issues as they occur and implementing the solutions to your practices will leave you with a streamlined process that has little to no problems. This helps make your system's decision-making more straightforward and well thought out to limit mistakes. Workers are also more confident in the process, allowing them to be more productive and trust what they're doing.

Keep reading below for those 8 key steps to take as your establish your company's risk management framework.

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How to Establish a Risk Management Framework

1. Establish Your Risk Policy

Before developing a risk management framework, you first need to understand what you're in business for and what risks you're trying to mitigate. Other business operations such as marketing, HR, employees, regulatory responsibilities, liquidity, IT, security, information management, and different pertinent sections should be accounted for.

2. Establish the Business Context

Businesses don't operate out of thin air. They exist in communities with cultures and legal systems they need to run in. They deal with clients, suppliers, and personnel. They have internal and external stakeholders and processes to help them run their operations. As such, they have to consider the impact that all these parties have on the operations during delivery or non-delivery of goods and services.

3. Identify Liabilities

Once you understand your working environment, identify potential factors that could hamper your productivity. Once these risks have been identified and categorized, possible remedies can also be determined in advance to ensure you're ready for any occurrence in the future. Knowing your liabilities will help you better prepare and fortify your business against them.

4. Investigate and Assess Risk

Identifying the cost or consequence and the likelihood of a risk occurring will help you gauge your risk tolerance level. If the probability is too high or the price or consequence too high on a risk, avoiding the risk should be the priority. If the price is relatively low and effects minimal, taking a chance could be the right thing to do. 

Continuously assessing and classifying risks and business opportunities will help you make more informed decisions as conditions constantly change. And depending on the internal and external conditions, your risk management framework will help you strategize and make strategic moves when conditions are right.

5. Handle and Manage Risk

After identifying a risk, your options include accepting, circumventing, shifting, mitigating, or keeping the risk. Planning can be done depending on the strategy used and the current levels of exposure for the business. Identifying and acknowledging risk is the first step to dealing with it, and depending on how you choose to address it, risk levels will keep on changing. 

Your business risk management protocols can include:

  • Lucidity in terms
  • Getting insurance and mitigating effects when a risk occurs
  • Keeping good records to refer back to
  • Keeping to timelines and due dates
  • Practicing in areas of expertise
  • Screening of clients, consultants, and opportunities

6. Liaise and Seek Advice

Make sure to communicate with all relevant parties and ensure everyone has the correct information at the right time. To reduce the instances of clients taking risks that put you in jeopardy, inform them of deadlines and repercussions if they fail to meet their end of the deal. Shifting responsibility to the other party when you have handled your piece will ensure everyone works well to successfully deliver projects—mitigating risks. 

7. Track and Review Risks

Constantly tracking new risks and reviewing existing ones will provide new information concerning said risk's status. The report will inform your decisions regarding the risk level and help you evolve your strategy as necessary. This will also assist in identifying new risks as the business environment evolves and help you put measures to deal with such threats if applicable.

Tracking and reviewing risks improves your situational awareness and ensures you never get blindsided by market forces. 

8. Keep Good Records

Keeping records helps you document essential information about how a threat occurred, how it was identified, dealt with, or mitigated. Still, most importantly, it sets a precedent for such an occurrence and helps future generations of employees deal with it. Keeping records also helps when reviewing the effectiveness of the strategies used to deal with risk and avails areas that need improvement or could be implemented on other applications. 

Implementing findings from records and future projections about threats is the best way to improve your security risk management system. So ensure you keep meticulous records of all risks and remedies used to fix them when they occur. 

Conclusion

In life, nothing comes without an attached risk, especially so in business. Learning how to anticipate and deal with hazards will make your business resilient and make you a better business person. Having a risk management framework is the most effective way of dealing with risk, and you should ensure you have one in place. 

At Accountable, we'll keep on providing you with the best information on data security and risk management to help you make the best choices for your business. 

So if you'd like to learn more about risk management or some of our services, visit our blog page for more informative articles or contact our customer support team for more information.  

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