It is important for businesses to create risk management
plans that are appropriate for their company.
They may look to best practices as a guide to create their risk
management plans, but a cookie cutter approach does not always work. Every business is different even if they are
in the same industry. They each have
their own acceptable levels of risk and their assets are not always valued at the
same level as another company.
The amount
of money a business spends on their risk management plan also varies from
company to company. A small or large
budget may be required, but how effective and well managed their risk
management plan is will play a large role in the overall cost of it. Companies that compare how much they each
spend on risk management may prove to not be as helpful as some have previously
believed. It could help determine a general
guideline for how much the company might need to spend, but it is not an
absolute amount. Jack Jones has given a
great example on how to determine how much you should spend. He compares it to buying car insurance. You can get an estimate how much most people
are paying, but you will not use that as your only reference. You would want to know how much coverage you
would need based on risks and assets as well as if are there enough funds to
pay for it.
Leadership
can often be left out of this equation.
If management does not believe that there is much risk despite what they
have been told, the company will surely be in poor condition in regards to the
risks they are taking. Risk management
should influence company policies, priorities, initiatives and actions. If a business only has the tolerance for low
risk, their decisions should reflect that.
Keeping this in mind is key to successful risk management. It is also important to make changes to the
risk management plan when necessary. If
the company cannot mitigate a risk that they previously could, they need to
evaluate how it will affect the company overall and change their policies
accordingly. Keeping employees informed
of risks and how their decisions can affect the company’s overall risk is also
important.
Every
business faces their own unique types of risk.
To manage their risk appropriately they must examine how much risk they
face, what level of risk they can tolerate, how much they can spend to mitigate
their risks and how their policies reflect their risk. Using best practices as a guideline will help
keep them on track to effectively managing their risk. Ultimately it is up to the company to develop
their own risk management plan that is tailored
to meet their needs.
References:
Jones, J. (2011). To Be FAIR About It A
perspective on risk and risk management. Retrieved Oct 22, 2013, from Risk
Management Insight:
riskmanagementinsight.com/wp-content/uploads/2011/03/to-be-fair-about-it-v1.pdf
