What’s the worst that could happen? Risk management is one of the first things you should be thinking about when planning for pretty much anything in your business.
The truth is, risk inescapable; success of your business is not determined by your ability to avoid risk, rather by your ability to accept, plan for, and take advantage of the varying outcomes risk might present to you.
It might sound negative, but risk management is actually more optimistic than it seems.
The key takeaway is that successful risk management strategies are proactive, as opposed to reactive.
By thinking ahead, you can prepare for and prevent risks before they even have a chance to arise.
In this article, we’ll take a look at how you can use Process Street to streamline and automate your risk management approach, including:
- Getting started with the basics of risk management
- Common risk management misconceptions
- Risk management standards
- The risk management process
- Key principles of risk management
- Benefits of risk management
- How to automate risk management
- 30+ risk management templates (free!)
- More useful risk management resources
Hopefully by the end of it, you’ll have a better understanding of how to focus your risk management efforts into a forward-facing, proactive approach.
There are lots of ways to approach and prepare for risk, and this article will give you the tools you need to master risk management.
Getting started with risk management
First, a quick definition of risk management by a respected international standards body:
“…[the] systematic application of policies, procedures and practices to the activities of communicating and consulting, establishing the context and assessing, treating, monitoring, reviewing, recording and reporting risk.” – ISO 31000 – Risk Management Guidelines
So, risk management is just acknowledging that risk happens, and taking measures to ensure you’re completely prepared for it.
There are many ways to successfully implement risk management; the goals of any risk management program centre around the idea of identifying, understanding, and preparing for all kinds of potential dangers, hazards and eventualities that deviate from the expected outcome or result of business operations.
Simply put, it’s anything that’s not part of the standard operating procedure.
One of the most important ideas of successful risk management systems is the focus on proactive management of risk.
Proactive versus reactive risk management
Proactive (or simply “active”) risk management is defined by the preemptive nature of the process.
It doesn’t just seek to mitigate known risks; it is a future-facing process that seeks to enforce a kind of quality management framework in order to mitigate risks both known and unknown, and ensure that there is as great an effort as possible toward the prevention of risks of all nature.
Reactive risk management is at the mercy of the unknown; businesses that aren’t proactive will be lost in the constant battle against risks they haven’t adequately prepared for.
Proactive risk management is essential to any successful risk management program.
Enterprise risk management
Enterprise risk management is a flavor of risk management that differs in a few of its key principles.
In practice many ideas are similar; the chief difference lies in ERM’s focus on how risk affects business goals and outcomes. This is similar to the approach of the ISO 31000 standard for risk management guidelines.
Traditional risk management is less concerned with high-level ideas like business goals and outcomes, and simply seeks to identify, quantify, and rank risks in order of priority, by looking at the calculated numeric values for probability of risk occurring, and the severity of the outcome, should the risk occur.
This quote nicely summarizes key ideas of enterprise risk management:
“The culture, capabilities, and practices, integrated with strategy-setting and performance, that organizations rely on to manage risk in creating, preserving, and realizing value.” – The Committee of Sponsoring Organizations of the Treadway Commission (COSO), from Enterprise Risk Management – Integrating with Strategy and Performance
Common risk management misconceptions
Despite the prevalence of risk management in business process management approaches, there is a tendency to see risk management as a focus on the negative outcome or potential of a business.
In reality, that’s not the case – risk management is a practice that depends equally on the ability to recognize and make the most of the positive, opportunistic side of risk.
Risk: It’s not all badWhile it’s true that risk is, by definition, associated with negative outcome, the point of risk management is to recognize the opportunity in such situations for capitalizing on hidden or less-than-obvious potential.
That might mean choosing the lesser of two evils, or it might mean understanding that risk can sometimes be necessary for performance gains.
In line with principles of continuous improvement, risk management is an ongoing process that does not simply stop and start with a single SWOT analysis or a couple of board meetings. Rather, risk management is a framework that seeks to constantly tweak, refine, and optimize a business and its processes.
Risk management standards
There are a number of risk management standards designed to consolidate best practice principles and help to streamline and improve risk management implementations for businesses.
Another factor driving the standardization of risk management frameworks has been the increased scrutiny that organizations must face with regard to their risk management systems.
Risk management systems are often required to stand up to rigorous internal audits and assessments, in order to prove that they are effective in their implementation, and that they are in line with company goals and objectives.
The family of risk management standards defined by ISO 31000 is one such example of a leading international standardization of a risk management approach.
ISO refers to the International Organization for Standardization; the 31000 part refers to a family of standards for risk management.
As well as being an umbrella term for a bunch of different standards, ISO 31000 also refers to a singular standard, specifically known as ISO 31000:2018.
This standard defines a set of guidelines for managing risk, designed to be used by organizations of any size, working in any area, to implement effective risk management systems.
Unlike many other ISO standards like 9001 for quality management, or 14001 for environmental management, ISO 31000 is a set of guidelines. That means you can’t get an ISO 31000 certification in the same way you could for other standards with specific requirements.
Nonetheless, ISO 31000 is a leading framework for organizations seeking to get started with risk management.
Check out our post on ISO 31000 for a deep dive into the standard.
Risk management process
Risk management can be simplified into a process with clear steps, namely:
- Risk management objectives
- Risk identification
- Risk assessment
- Risk response
- Risk monitoring
1. Setting and aligning your risk management objectives
Risk management starts with setting clear objectives, and making sure those objectives are aligned with business strategies.
After all, what’s the point of risk management if not to help your business succeed in hitting objectives?
Focusing on risk management alone will not help you hit business objectives; rather, the results of a well implemented risk management system will be invaluable for helping you understand how to approach and exceed existing business goals.
Risk management can help businesses align their objectives with a well-defined mission statement, forward-facing vision, and core company values and culture.
2. Identification and documentation of risks
Risks are essentially anything that might stop your business from achieving goals. That includes larger, severely high-risk concerns, but also smaller, seemingly insignificant risks on the level of process or individual projects.
In any case, all risks should be identified and recorded clearly and thoroughly.
Process Street uses rich form fields to record detailed information and media during a process. You won’t have to worry about misplacing or lacking for information when you build and run a process with Process Street.
But more on that later, when I show you the risk management process built specially for you in Process Street (and it’s completely free).
3. Assessment of documented risks
Once risks are recorded, they have to be assessed in order to determine severity and priority.
This is essential for understanding the impact of risk on business goals and objectives, as well as how likely it is the risks could happen, and when.
Some risks, like natural disasters or political unrest, are difficult or impossible to predict. That doesn’t change the fact that risk assessment must always be performed to the best of the organization’s ability, by all departments.
Assessing risks is also important for making sure that the risks that are being recorded are actually credible. This is the time when scrutiny can be applied, and methods of qualitative and predictive analysis can be used to better understand which risks should be taken most seriously.
For example, during the risk assessment phase, a prioritization matrix might be used to order risks by significance.
The goal of risk analysis is to help top management understand where to focus their most immediate attention.
4. Risk response
Also known as risk treatment, this stage is focused on responding to the highest priority risks.
The main approaches to risk response are:
- Acceptance (or retaining)
- Mitigation (or reduction)
- Transference (or sharing)
Each of these are covered in more detail in the section on risk management principles later on in the article.
It’s management’s job to decide which risks are highest priority, and to figure out an appropriate risk response strategy.
In keeping with the general risk management approach, risk response strategies should be considered in terms of the given risk’s impact on business goals and objectives, as well as the overall costs weighed against benefits for each proposed strategy.
5. Risk monitoring
The final stage represents the cyclic nature of risk management, because, like continuous improvement, the monitoring of risks is an ongoing process that never truly ends.
Contexts of organizations and their risks are constantly shifting and changing, so it makes sense that risks should constantly require monitoring to make sure things aren’t slipping out of hand, and that the organization can rest assured that the significance of each risk is properly understood.
Key principles of risk management
These principles each represent a different type of risk response. After risk has been identified, the following strategies for risk treatment can be considered:
Somewhat self explanatory, this strategy is focused on carefully planning so that certain risk potentials are completely (or at least, as completely as possible) removed from the operating procedures of a business.
This approach assumes that a perceived risk event or factor can be removed from the business strategies in order to avoid the consequences of said outcome.
When a risk factor or event cannot be excluded completely, a company may try to reduce the effect of that risk by tweaking and adjusting certain aspects of operations.
The difference between risk reduction and risk avoidance is that risk reduction accepts that the risk cannot be completely avoided.
Risk sharing involves splitting the damage of a perceived risk, either between different departments of an organization, different participants of a project, or even external stakeholders like business partners or investors.
Retaining risk is the decision that a risk is actually worth the perceived damage or effect, from a business standpoint.
This means the organization will have to make adequate plans to deal with the eventuality of damage incurred by the risk.
A simple way of understanding risk retention from a business standpoint is to imagine a situation where a company’s expected profit is larger than the sum of the perceived risk potential. In this case, it’s logical to see why a business might choose to accept and retain a degree of risk.
Benefits of risk management
So what makes risk management so appealing? Why are so many people interested in using risk management in their business?
Risk management can increase productivity
No matter what industry you’re in, or what kind of product or service you’re selling, you can always quantify your productivity to some degree. Productivity is always tied to your process. What risk management allows you to do is look at your process and figure out ways to improve the way you get work done.
Not only will his help you optimize for higher productivity, it also means your work environment will be safer because you’ve lowered the amount of risk involved.
Risk management improves your bottom line
Risk management strategies aren’t just about finding a new insurance policy. A properly implemented risk management system should actually save you money because logically you’ll be facing fewer losses and improved efficiency. That translates to reduced operational costs and ultimately, more profit.
All individuals at all levels of the organization stand to benefit from the forward-thinking, opportunistic outlook that risk management systems provide.
Successfully implementing a risk management system offers benefits like:
- Helping everyone in the organization understand and prepare for risk
- Helping to develop clear goals and objectives in line with a higher level business strategy
- Fostering more informed decision-making
- Cultivation of a company culture of continuous improvement
- Improving trust between the organization and its stakeholders
- Encouraging innovation and positive change within the organization
- Improve success rate within the organization
How to automate risk management
The positive impact of a risk management system is amplified when combined with automation.
When you consider that any risk management framework is essentially a series of repetitive tasks (because risk management by definition is a repetitive process) the benefit of automation becomes immediately clear.
By utilizing automation, you can save time and money by eliminating tedious manual tasks from your workflow.
What’s more, you actually reduce the risk of the risk management process, because less manual work means less room for human error.
You can easily automate your risk management process with Process Street.
In fact, the risk management template below already has a whole bunch of automation built in, like conditional logic for reactive decision making, dynamic due dates to keep on top of deadlines and streamline deliverables, and role assignments to cut out time wasted from chasing up colleagues to do their part in the process.
For a comprehensive introduction on how to use Process Street for risk management, check out this webinar video:
Otherwise, check out the gargantuan list of risk management templates we’ve prepared for you down below.
Free risk management templates
If you’re looking for templates to make getting started with risk management that much easier, look no further.
When it comes to risk management, audit and inspection processes are one of the most fundamental components of risk identification and analysis.
So, here’s a bunch of free templates to help you streamline your risk management system.
Risk management process
This risk management template is a simple process you can use to get started with risk management.
Of course, the best kind of risk management strategy will be highly customized, which is why you should edit this template to suit your own needs.
Nonetheless, this template will help you get a head start!
SWOT: Strengths, Weaknesses, Opportunities, Threats
SWOT stands for: strengths, weaknesses, opportunities, threats.
The purpose of a SWOT analysis is to examine an organization, business, or project using these four attributes to determine a strategy for improvement or optimization.
This SWOT analysis template will help you to assess risks and potential rewards while also understanding the most important factors that impact the success (or failure) of the business.
FMEA: Failure Mode and Effects Analysis
A failure mode and effects analysis is a method for identifying potential problems and prioritizing them so that you can begin to tackle or mitigate them.
This FMEA template is designed to help you follow a grid process for documenting your FMEA quickly and easily!
The purpose of this standard operating procedure (SOP) template is to provide the necessary structure from which to create your own standard operating procedures.
You can edit and customize it as you like; it will definitely help you nail a process for writing SOPs that works for you.
ISO 14001 EMS structure template
This ISO 14001 EMS structure template is designed to help you easily build standard operating procedures in line with the ISO 14001:2015 requirements for an environmental management system.
ISO 14001 EMS mini-manual procedures
Here we have an ISO 14001 EMS mini-manual template, which is a fully filled-out example for a fictional construction company using the mini-manual template above.
ISO 14001 environmental management self-audit checklist
This ISO 14001 internal audit template is designed to be used to perform an internal audit against the requirements of ISO 14001:2015 for an environmental management system (EMS).
Self-auditing is an important part of risk identification and analysis, and can help to define a high-level overview of an organization’s performance, and how any perceived risks might affect that.
ISO 19011:2018 checklist for auditing management systems
This ISO 19011 audit checklist is designed to simplify the process of planning for and carrying out an audit of a management system.
Consider using this tool to adapt the audit programme for the specific requirements of a risk management audit (i.e. to the guidelines of ISO 31000) since ISO 19011 is designed to work regardless of the management system type, the scope, complexity, or scale of the audit.
ISO 9001:2015 audit checklist for quality management systems
ISO 9001 is all about quality management systems. This audit template will help you assess the performance of your QMS against the requirements of ISO 9001:2015.
Quality is closely related to your organization’s ability to deliver value. Remember that risk management is all about preserving and creating value.
So, running a QMS audit will help you to pinpoint risks and problem areas, and ultimately improve your organization’s ability to deliver value to your stakeholders.
ISO 9000 structure template
Just like the ISO 14001 structure template above, this ISO 9000 structure template is designed to help you easily build standard operating procedures which adhere to ISO 9001:2015 Quality Manual
ISO 9000 marketing procedures
This ISO 9000 marketing procedures template is the filled-in version of the above ISO 9000 structure template; it’s an example of what a fully functional ISO 9001 mini-manual might look like.
More ISO audit templates
- ISO 14001:2004 to ISO 14001:2015 EMS transition checklist
- ISO 9001 and ISO 14001 integrated management system (IMS) checklist
- ISO 26000:2010 social responsibility performance assessment checklist
- ISO 45001:2018 occupational health and safety (OHS) audit checklist
- ISO 27001:2013 information security management system (ISO 27K ISMS) audit checklist
- ISO 9004:2018 for sustainable success in QMS self audit checklist
Electrical inspection checklist
Electrical inspection can be risky business – and an electrical inspection checklist will help you minimize human error and streamline the whole process.
This checklist is geared toward inspectors who are looking to visit residential properties to perform an assessment.
Our goal with this checklist is to create an actionable way to follow the correct procedures of industry standard inspections which can fit easily and fluently within the modern workflow, making the process easier and more effective than before.
More electrical inspection checklists
- Electrical inspection checklist for motors and vehicles
- Electrical inspection checklist for marinas, docks, and boatyards
- Electrical inspection checklist for electric vehicle charging equipment
- Electrical inspection checklist for agricultural buildings
- Electrical inspection checklist for hospitals and health care
- Electrical inspection checklist for residential rough inspection (general)
- Electrical inspection checklist for air-conditioning and refrigerating
Hotel sustainability audit
This hotel sustainability audit provides a structured, quick and straightforward way for any hotel business to internally assess the sustainability of their operations.
For more hotel and hospitality templates, check out our hotel management template pack.
More inspection templates
- Monthly housekeeping inspection checklist
- Hotel safety inspection checklist
- Rental inspection checklist
- Pretrip inspection checklist
- FHA inspection checklist
- Fire inspection checklist
- Restaurant health inspection checklist
- Roof inspection report template
- Site inspection checklist
- Forklift inspection checklist
- Facility inspection checklist
- Home inspection checklist
- Vehicle inspection checklist
- Privileged password management
More risk management resources
If you found this article useful, you might be interested in these resources:
- Basics of Enterprise Risk Management (ERM): How to Get Started
- What Is ISO 31000? Getting Started with Risk Management
- What is Quality Management? The Definitive QMS Guide (Free ISO 9001 Template)
- The Complete Guide to Business Process Management
Don’t forget to sign up for a free Process Street account! It takes less than 2 minutes.
How do you approach risk management? Do you use any specific frameworks, tools, or approaches? Let us know in the comments below!