What Should A Risk Management Plan Include?


Managing risks in your international business can be a challenge, especially when you have no idea how to go about it. If you don’t have a well-thought-out risk management strategy, your efforts to manage threats are bound to fail. So, even as you look for practical ideas on how to improve risk management skills, it’s important to learn how to develop a workable risk management plan.

So, what should a risk management plan include? Ensuring that your risk management strategy entails all the essential elements is important because the success or failure of your risk management endeavors depends on the strategy you implement.

Fortunately, it’s now quite easy to create a good risk management plan, thanks to the numerous examples of risk management strategies available online that you can use to draft your own strategy.  The first step is to understand what risk management is and what it should entail.

What Is a Risk Management Plan?

A risk management plan is a document that outlines your risk identification, assessment, analysis, prioritization, tolerance, and mitigation steps. This document is prepared by top managers, project managers, team leaders, or any other participant who is skilled in risk management.

The main purpose of developing a risk management strategy is to create a clear path through which you can effectively predict risks, evaluate their impact on your business, and define the most effective responses to the risks.

What Should Your Risk Management Strategy Contain?

As discussed above, your risk management undertakings will only be effective if your risk management plan is well-structured, methodical, collective, and cross-organizational. So, make sure your plan contains all the necessary constituent elements. Here are the main risk management components you should incorporate into your plan:

Risk Identification Strategies

For you to mitigate every risk you encounter in your international business, your risk management plan must have well-defined risk identification strategies. These strategies will help you to successfully predict potential and actual risks your business faces. This is commonly referred to as the risk universe.

Your ability to positively identify all kinds of risks that your business is likely to face now and in the future determines how successful you’ll be in averting or minimizing the chances of those risks materializing. Risk identification strategies should help you to identify all risks and their sources so that you can take the necessary steps to safeguard your business.

Risk Evaluation Strategies

After you’ve successfully identified potential and actual risks in your business, the next task is to analyze them and figure out their potential impact on your business. Your risk evaluation strategies will help you to learn the severity of each risk and the level of exposure to the risk. These strategies should help you understand the potential cost of the risks materializing.

Once you understand the risks you face and their severity, you can effectively prioritize them and find a practical way of mitigating them. Risks with high costs and high likelihood of happening are ranked the highest while those with low cost and less probability of happening are rated low.

Risk Reduction Strategies

What are risk reduction strategies? These strategies are meant to help you reduce the chances of a risk occurring, as well as minimize the severity of unavoidable risks. Once you’ve positively identified risks and analyzed and prioritized them, you should find a way to reduce your business’s exposure to the more serious risks.

For instance, you can spread the risk in order to minimize its effect and likelihood of occurring by diversifying your products, services, technologies, and other important aspects of your business to mitigate risks.

Risk Response Strategies

These strategies should clearly define the steps you need to take to respond to the risks in order to minimize their effects on your investment. Make sure you share these steps with all shareholders so that everyone knows the direction your business should take. Your risk response strategies should also assign the role of risk response to the responsible individuals.

Risk Monitoring Strategies

Because not all risks will be completely eliminated, you need to continuously monitor all risks to know when they change or reoccur. This keeps your business fully prepared for any situation. 

As your business grows and the markets change, risks change. So, you have to monitor these changes and update your risk management plan accordingly.

About the author

Author: FITT Team

The Forum for International Trade Training (FITT) is the standards, certification and training body dedicated to providing international business training, resources and professional certification to individuals and businesses. Created by business for business, FITT’s international business training solutions are the standard of excellence for global trade professionals around the world.

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