Generally, risk management processes follow a few logical steps, although the terminology used to describe these steps is often different, and additional steps are sometimes added. The 5 risk management process steps described below form a simple, yet effective risk management process.
Here are some examples of them:
- Risk Identification
- Risk Analysis
- Risk Evaluation
- Risk Treatment
- Risk Monitoring and Review
Step 1: Risk Identification. In order to identify risk, so-called risk based thinking has to be used. People often notice potential risks, but then don’t think anything more about it and don’t take action. When a risk is uncovered, it must be recognized as such and should then be described in terms of its potential effects techniques are available to identify risks. At this stage it is also logical to capture the details in a Risk Register.
Step 2: Risk Analysis. Once risks are identified you determine the likelihood and consequence of each risk. You should understand the exact nature of the risk and how it could affect your quality goals and objectives. This information should also be captured in the Risk Register.
Step 3: Risk Evaluation. Risk evaluation is done by determining the magnitude of the risk, which is a combination of the likelihood of the risk happening and the severity of the risk consequences. Once the risk magnitude has been established, a decision needs to be made about whether the risk is acceptable or not as is. If it is not acceptable, the next step would be to determine what needs to be done in order to mitigate the risk. The risk evaluation is once again captured in the Risk Register.
Step 4: Risk Treatment. Risk treatment is also known as Risk Response Planning. This process involves assessing all the risks identified, and then creating and implementing action plans that will mitigate the risks until they are at acceptable levels. While doing this, you need to look not only at minimizing the negative risks, but also at how the opportunities that have been identified can be enhanced. Creating preventive plans, mitigation strategies and contingency plans are all part of this process. Remember to add the risk treatment plans to the Risk Register.
Step 5: Risk Monitoring and Review. Once the full detail of your risks and the steps to mitigate them are in the Risk Register, this can be used to regularly monitor, track and review risks.
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