5 Risk Management Best Practices for Organizational Management
by Tori Thurmond / February 27th, 2024
Every day, we continuously evaluate risks and decide how to prevent them from adversely impacting us.
We foresee the possibility of something happening to our car, hence we buy insurance. We know the statistics of home break-ins, so we set up an alarm system and replace the locks. We see the forecast for rain and bring an umbrella when we leave the house.
Similarly, every business organization also has risks that are unique to their environment.
The AICPA defines Business Risk as risk “resulting from significant conditions, events, circumstances, actions, or inactions that could adversely affect an entity’s ability to achieve its objectives and execute its strategies.” Essentially, the success and operability of your business organization depend on how well you manage your organizational risks.
Whether you’re building out IT risk management best practices for a client or auditing your own organization’s risk assessment strategy, you have to have a plan. Below, we explore the five best practices for effective risk management to help your business bolster growth in a strategic manner.
What are the Steps of Risk Management?
Business risk management involves five key steps to effectively identify, assess, and mitigate risks that could impact an organization’s objectives and strategies.
1. Identification: This step involves identifying all potential risks that could affect the business, including internal and external factors.
2. Analysis: After identifying the risks, the next step is to analyze them to understand their likelihood and potential impact on the organization.
3. Planning: Once the risks are identified and analyzed, a risk management plan should be developed. This plan outlines how the organization will mitigate and respond to the identified risks.
4. Mitigation: In this step, strategies and controls are implemented to reduce the likelihood and impact of the identified risks. This may involve implementing security measures, policies, or procedures.
5. Monitoring: Continuous monitoring is essential to ensure that the risk management strategies are effective. As a result, conduct regular audits and reviews to assess the risk mitigation effectiveness and adjust as needed.
What are Best Practices in Managing Risk?
1. Involve Stakeholders
To effectively manage risk, include the stakeholders every step of the way, beginning with the initial Risk Assessment. Stakeholders can include people such as managers, clients, employees, shareholders, unions, etc. Encourage stakeholders to help improve the continuous risk process by asking them, “What keeps you up at night?”
Many of these individuals may be key personnel and are key to your Risk Management processes. Each represent different roles and responsibilities within your organization, thus giving a holistic representation of all business aspects and each risk associated with it.
2. Create a Strong Risk Culture
Our second risk management best practice – and an important step in any successful Risk Management program – is creating a strong risk culture. Risk culture is defined as the values, beliefs, and attitudes about risks by a common group of people.
Who Owns the Risk? If your business doesn’t yet have an assigned managed service provider (MSP), risk management and ownership defers to a shared responsibility of several stakeholders.
Primarily, it is the management’s and the board of directors’ responsibility to clearly communicate the company’s culture, train employees on the proper security measures, and set the tone for compliance from the start. Management buy-in is critical to ensure that the importance of risk identification and awareness emanates throughout the entire organization.
3. Communication
Effective risk assessment and management starts with communication. You must create awareness of risks through communication with your entire organization.
Communicating throughout your organization on key risks (or risks that would have a high organizational impact) allows all departments to identify, assess, mitigate, and monitor any new risks properly.
For more information, read our guide on the 6 ways insiders expose companies to security risks.
4. Clear Risk Management Policies
Having these clear policies developed will help you identify all potential risks that could affect your business, the likelihood and impact of those risks, how you plan to mitigate and prevent those risks, and how you will monitor for and manage new risks.
To define clear risk management policies, answer the following questions:
- Is your Risk Assessment policy clearly documented?
- Are the roles and responsibilities clearly defined?
- Are there clear policies and procedures defining the mitigation of any and all identified risks?
- Do you have a business continuity plan (BCP) and an incident response plan (IRP) in place that define how your organization will handle and overcome any unforeseen risks?
- Are these policies communicated effectively to all employees?
5. Continuous Risk Monitoring
After performing your initial risk assessment and implementing the proper controls to mitigate and address these risks, the next crucial step is monitoring. Clear monitoring processes must be established to ensure that any and all risk mitigation efforts are working and effective.
Continuous monitoring allows for proactive identification and response to potential threats, ensuring your organization remains resilient in the face of evolving risks. Regular audits and reviews should be conducted to ensure that the risk management processes are up to date and aligned with the organization’s objectives.
By maintaining a vigilant approach to risk monitoring, organizations can stay ahead of potential threats and protect their assets, reputation, and overall business continuity.
Manage Your Risk with KirkpatrickPrice
Risk management, the process of determining what the risks are to your organization and creating steps to mitigate those risks, is critical to your organization, but it can feel overwhelming when you’re trying to manage your risk by yourself. It’s a continuous and constantly evolving process. While we hope these good practices in risk assessment and risk management have helped outline a plan for your organization, we want to partner with you as you work to make your organization as secure as possible. To learn more about risk management or how KirkpatrickPrice’s Risk Assessment services could benefit your organization, connect with an expert today.
More Risk Management Resources
How a Risk Assessment Could Save Your Business
Risk Management 101 Webinar Series
The Importance of a Culture of Compliance: CompuMail’s Insights
