Steps to Write a Risk Management Business Plan

## Introduction

A business plan is a document that describes the future of a business. A business plan for a risk management program is similar to a business plan, except that it describes a program, rather than a company.

Business plans for risk management programs are different from business plans for other types of organizations, such as banks or insurance companies, in two important ways:

– Risk management programs do not have shareholders.

– A risk management business plan focuses on the risks faced by the organization, and not on the financial performance of the organization.

## Purpose of the Risks Management Program

Risk management programs have two primary purposes:

1. To identify and manage risks to the organization and its assets.

2. To ensure that the organization is prepared to respond to the risks that are identified and managed.

## Risk Identification

The risk identification phase is the first step in the risk management process. The purpose of this phase is to identify the risks to which the organization will be exposed in the future. The risk identification process should be based on the organization’s mission, vision, and values, and on its strategic and operational plans. The risks identified should be those that are most likely to have a material effect on the business. The identification of risks should not be done in a haphazard manner. It should be done systematically, and in a way that is consistent with the mission and vision of the business, and with the strategy and plans of the company. The results of the risk identification should be documented, so that they can be used as a basis for the development of risk management policies and procedures, and for the preparation of annual risk management plans and risk management reports.

It is important to remember that the purpose of risk identification is not to predict the future, but to identify those risks that will have the greatest likelihood of materializing in the near future, and that can be managed in a cost-effective manner. In other words, it is not necessary to identify all possible risks that might affect the organization in the foreseeable future. It is also important to note that risk identification does not have to be a time-consuming process. It can be done quickly, as long as it is done systematically.

## Risk Identification Checklist

Here is a list of items that should be included in a risk identification checklist:

1. Mission, Vision, and Values. The organization’s purpose, mission, and vision, as well as its values.

2. Strategic and Operational Plans. The company’s strategic plan, and the operational plans for the next three to five years.

3. Risk Management Policies and Procedures. Policies and procedures that govern the identification, evaluation, and management of risks. These should be developed in consultation with risk management experts, and should be consistent with risk identification and management processes that are used by other departments within the organization (such as finance, human resources, legal, and information technology).

## How to Identify Risks

There are many ways to identify risks. The following are some of the most commonly used methods:

– Risk assessment. A risk assessment is a systematic process of identifying, evaluating, and documenting the risks associated with a particular activity, product, or service. In the risk assessment process, the risks are identified, evaluated, and documented, and a risk control plan is developed and implemented to reduce or eliminate the identified risks. Risk assessments can be performed on a project-by-project basis, or on a program-wide basis. A project-specific risk assessment should be performed at the beginning of a project, to identify and evaluate the risks related to the project. A program-level risk assessment can be conducted at any time during the life of the program.

– Exposure analysis. Exposure analysis is the process of determining the likelihood that a particular risk will occur, and of estimating the impact that the risk will have on the company, if it does occur. The exposure analysis process begins with a risk assessment, which identifies the risks and their likelihood of occurrence. Then, a risk analysis is performed, which estimates the impact of the risks, if they do occur. Finally, an exposure analysis is conducted, which determines the likelihood and impact of each identified risk, and identifies those risks for which the company is not prepared to manage the risk.

– The risk analysis and the exposure analysis should be conducted in a systematic manner, to ensure that all identified risks are analyzed, and all risks are evaluated in a consistent manner. For example, if a risk is identified as having a probability of occurrence of 50 percent, and an impact of $100,000, then the risk should be evaluated as having an expected loss of $50,000. The expected loss should be determined by multiplying the probability of the occurrence of the identified risk (50 percent) by the estimated impact of that risk (100,00), and then dividing the result by two. The result of this calculation is the expected loss, or the amount of money that is expected to be lost, if the risk occurs. If the risk is not expected to occur, then no expected loss can be determined, and no action should be taken to manage that risk.

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