What is a Risk Management Plan?

A risk management plan documents potential risks to an organization, and the steps employees should take to keep those risks at acceptable levels. An organization will have many risk management plans to address different risks.

Key stakeholders, including senior management, compliance officers, and department managers, may develop a risk management plan to address high-level and strategic risks. Or in a project management setting, a project manager works with the project team to create a risk management plan particular to project risks.

Regardless of the risk management plan’s scope, the project is developed by a group of stakeholders who know how to identify various potential risks and perform risk analysis.

Many of us assume that a risk management plan and risk assessment are synonymous; they’re not. A risk management plan documents the whole process, including identification, evaluation, and risk mitigation. It also includes risk control monitoring, cost-benefit analysis, and financial impacts.

In contrast, a risk assessment is a specific part of the risk management process. You categorize each risk by likelihood and severity to outline the possible consequences and prioritize steps to mitigate the risk. Risk assessment is a crucial element of the overall risk management process and mainly focuses on identifying and analyzing risks.

What Is Risk Management?
Every organization is exposed to risks. Risk management is how we handle those risks-risk response planning for myriad uncertain events, from natural disasters to cybersecurity threats.

Risk management is not only wise to assure business continuity and profitability. Most laws, regulations, and industry compliance frameworks require proof of risk assessments and other methodologies to avoid data breaches and protect sensitive information.

Risk management does not eliminate all risks. Instead, it determines the best course of action to optimize the cost-benefit relationship between risk reduction and the use of corporate resources.