risk management in assignment

How to Create a Project Risk Management Plan

By Kate Eby | February 27, 2023

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Teams can use a project risk management plan to identify and assess the potential risks to a project. We’ve gathered expert tips on creating an effective risk management plan, as well as step-by-step instructions for creating an example plan.

On this page, you’ll find information on what to include in a project risk management plan and how to create a plan , as well as step-by-step instructions for completing an example project risk management plan .

What Is a Project Risk Management Plan?

Project teams create a project risk management plan , a document that helps identify and assess potential risks to a project. The plan outlines how your team will analyze and mitigate the potential risks to ensure project success.

The project risk management plan is one of the most important documents in project risk management . You can learn more about project risks in general — as well as specific types of project risks — in our comprehensive guides

What Does a Risk Management Plan Cover?

A risk management plan should cover a number of areas detailing potential project risks and how your team will deal with them. It will include a description of the project, along with how your team will identify and assess risk.

At a minimum, your project risk management plan should include the following details:

• Project description, including its purpose
• The team plan for identifying, logging, and assessing potential risks
• How the team will identify broad categories of risk
• How the team will evaluate the severity of each potential risk
• How your team will continue to monitor risks throughout the project
• How team members will be assigned as owners of various risks
• Your organization’s tolerance for certain risks, along with criteria for a risk being too large to accept

“A risk management plan defines how the risks for a project will be handled to ensure that the project can be completed within the set timeframe,” says Veniamin Simonov, Director of Product Management at NAKIVO , a backup and ransomware recovery software vendor. “The plan should cover methodology, risk categorization and prioritization, a response plan, staff roles, and responsibility areas and budgets.”

“The risk management plan will address ‘What are we going to do? How are we going to do it? What are the processes we're going to follow?’” says Alan Zucker, Founding Principal of Project Management Essentials . “It may include things such as what are the major categories you're going to use to define your risks. It might also include some guidelines for assessing risks.”

Components in a Project Risk Management Plan 

A project risk management plan will include certain components and describe how your project team will use certain tools to understand and manage potential risks. Some components include a risk register, a risk breakdown structure, and a risk response plan.

Here are components or tools that a project risk management plan often includes or describes:

• Risk Register: A risk register is the document your project team will use to identify, log, and monitor potential project risks.
• Risk Breakdown Structure: A risk breakdown structure is a chart that allows your team to identify broad risk categories and specific risks that fit within each category. Your team can decide on the broad categories, depending on your project.
• Risk Assessment Matrix: A risk assessment matrix is a chart matrix that allows teams to score the severity of potential risks based on both the likelihood of each risk happening and the impact to the project if a risk happens.
• Risk Response Plan: A risk response plan is a document that details how your team plans to respond to each potential risk to try to either prevent it from happening or lessen the impact if it does happen. You can learn more about project risk mitigation . 
• Roles and Responsibilities: The risk management plan can provide details on the project risk management team, including the lead member for risk management. It also likely details the roles and responsibilities each team member will have in addressing and dealing with specific risks.
• Risk Reporting Formats: The risk management plan describes how the project team will document and report its work on monitoring and dealing with risks. It describes the risk register format that the team will use. It might also describe how risks will be added to or deleted from the register and how the project team will provide periodic summarized risk reports to top project and organization leaders.
• Project Funding and Timing: The plan will likely have a section describing the overall funding and timing for the project. That section also likely details funding for all project risk management work.

To determine what you need to include in your risk management plan, see the following requirements based on project size:

An Organization’s Risk Management Plan Often Doesn’t Change with Projects  

Many risk management experts emphasize that an organization’s project risk management plans might not change much from project to project. That’s because the plan sets out particulars that will be followed for all projects.

“Remember, it's just an approach document that answers the question: How?” says Kris Reynolds, Founder and CEO of Arrowhead Consulting in Tulsa, Oklahoma. “The company or the department as a whole should have a single risk management plan that gets built as you're building your project management methodology. And it’s your Bible. It’s your guidebook. 

“But it isn't going to change across projects,” Reynolds continues. “What changes are the artifacts, including the risk register. But your approach of how you're going to address risk or analyze risk or plan for risk is in the project risk management plan document. As a company or organization, you create that document, and it exists for a year or two years without changing.”

To create a project risk management plan, your team should gather important documents and decide on an approach for assessing and responding to risks. This process involves gathering support documents, listing potential risk management tools, and more. 

Consider some of these basic steps and factors as you begin creating the project risk management plan:

• Gather Supporting Documents: Gather and read through supporting documents related to the overall project, including the project and project management plan. It’s important for your project risk team to have a full view of project goals and objectives.
• Frame the Context: Make sure your team understands both the business value of the project and the impact on the organization if the project fails.
• Decide on Risk Assessment Criteria: Decide how your team will identify and assess important risks. That will require your team to have an understanding of which types of risks your organization can tolerate and which risks could be ruinous to the project.
• Inventory Possible Risk Management Tools: Make a list of risk management tools and documents that your team might use to help identify and manage project risk.
• Known Risks: At the start of a project, team members will be able to identify a number of known risks , such as budget issues, shortages of material, and human and other resource constraints, which are measurable and based on specific events. 
• Unknown Risks: At the start of a project, team members will not be able to identify a range of unknown risks that could impact your project. Those risks are not as easily or objectively measurable as known risks and can crop up at any point during a project. A main goal of project risk management is to help your team discover and address unknown risks before they happen.
• Unknowable Risks: Your team will not be able to anticipate unknowable risks that could affect the project, such as catastrophic weather events, accidents, and major system failures.
• Understand Human Bias: Studies have shown that people overestimate their ability to predict and influence the future. We often think we have more control than we do. Those biases can affect how we assess and manage risks in a project. We tend to give too much credence to what happened with past processes, fall into agreement with others in our group, and be more optimistic than we should be about how long a project will take or how much it will cost.  It’s important to account for all of those biases as your team identifies and assesses project risk.

Steps in Developing a Project Risk Management Plan

After your project team has gathered documents and done other preparation work, you will want to follow nine basic steps in creating a project risk management plan. Those start with identifying and assessing risks.

Here are details on the nine steps of project risk management to keep in mind while drafting your project risk management plan:

• Identify Risks: Your team should gather information and request input from team and organization members to determine potential risks to the project. Some specific risks can threaten many projects. Other risks will vary, based on the type of project and the industry. “If you're talking about a software project, you could have risks associated with the technology, resources, and interdependencies with other systems,” says Zucker. “If you have vendors you're working with, there may be risks associated with the vendors. There may be risks that are software- or hardware-specific. If you're working on a construction project, those risks obviously would be very different. ”You can learn more about project risk analysis and how to identify potential risks to a project .
• Assess Potential Impact of Each Risk: After your team identifies potential risks, it can assess the likelihood of each risk, along with the expected impact on the project if the risk happens. Your team can use a risk matrix to identify both the likelihood and impact of each risk. You can learn more about how to create a risk matrix and assess risks .
• Determine Your Organization's Risk Threshold and Tolerance: Your team will want to understand your organization’s risk threshold , or tolerance for risk. Organization leaders might decide that some risks should be avoided at all costs, while others are acceptable. Take the time to understand those views as you prioritize project risks.
• Prioritize Risks Based on Impact and Risk Tolerance: Once your team assesses the potential impact of a risk and your organization's risk tolerance for risks, it will prioritize risks accordingly. “Prioritize risks based on their disruptive potential for an organization,” says Simonov.
• Create a Risk Response Plan: Your team should then create a response plan for each risk that the team considers a priority. That response plan will include measures that could prevent the risk from happening or lessen the risk’s impact if it does happen.
• Select Project Risk Management Tools: Your team will need to decide on the best risk management tools to use for your project. That will likely include a risk register and a risk assessment matrix. It might include other tools, such as Monte Carlo simulations. Learn more about various tools and documents to use in risk management . 
• Select an Owner for Each Risk: Each identified risk should have an assigned owner. In some cases, a department might be an owner of a risk, but most often, the team will assign individuals to monitor risks. In some cases, the owner will be responsible for dealing with the risk if it happens. Teams can list the owners of each risk on their project risk register. 
• Determine Possible Triggers for Each Risk: As your team conducts a closer assessment of all risks, it should identify risk triggers where possible. Triggers are events that can cause a risk to happen. Your team won’t be able to identify triggers for all risks, but it will for some. For example, if you have a plant without sufficient backup power, a trigger could be warnings of a violent storm that could cause a power outage.
• Determine How Your Team Will Monitor Risks: An important part of your plan includes recording concrete details about how your team will ensure that it can continually monitor risks throughout the life of a project.

Risk Management Plan Examples, Templates, and Components

Examples of project risk management plans can help your team understand what information to include in a plan. The risk management plan can also detail various components that will be part of your team’s risk management.

Project Risk Management Plan Template

Download the Sample Project Risk Management Plan Template for Microsoft Word  

Download this sample project risk management plan, which includes primary components that might be described in a project risk management plan, such as details on risk identification, risk mitigation, and risk tracking and reporting.

Download the Blank Project Risk Management Plan for Microsoft Word

Use this blank template to create your own project risk management plan. The template includes sections to ensure that your team covers all areas of risk management, such as risk identification, risk assessment, and risk mitigation. Customize the template based on your needs.

Project Risk Register Template

Download the Sample Project Risk Register for Excel

This sample project risk register gives your team a better understanding of the information that a risk register should include to help the team understand and deal with risks. This sample includes potential risks that a project manager might track for a construction project.

Download the Blank Project Risk Register Template for Excel  

Use this project risk register template to help your team identify, track, and plan for project risks. The template includes columns for categorizing risks, providing risk descriptions, determining a risk severity score, and more.  

Quantitative Risk Register Template

Download the Sample Quantitative Project Risk Impact Matrix for Excel

This sample quantitative project risk impact matrix template can help your team assess a project risk based on quantitative measures, such as potential monetary cost to the project. The template includes columns where your team can assess and track the probability and potential cost of each project risk. The template calculates a total monetary risk impact based on your estimates of probability and cost.

Risk Breakdown Structure Template

Download the Risk Breakdown Structure Template for Excel

Your team can use this template to create a risk breakdown structure diagram that shows different types of risks that could affect a project. The template helps your team organize risks into broad categories.

Step-By-Step Guide to Creating a Project Risk Management Plan

Below are step-by-step instructions on how to fill out a project risk management plan template. Follow these steps to help you and your team understand the information needed in an effective risk management plan.

This template is based on a project risk management plan template created by Arrowhead Consulting of Tulsa, Oklahoma, and was shared with us by Kris Reynolds.

• Cover Section: Provide information for the cover section , also known as the summary section . This will include the name of the project, the project overview, the project goals, the expected length of the project, and the project manager.
• Risk Management Approach: Write a short summary of your organization's overall approach to project risk management for all projects, not only the project at hand. The summary might describe overall goals, along with your organization’s view of the benefits of good project risk management.
• Plan Purpose: Write a short summary explaining how the plan will help your team perform proper risk management for the project.
• Risk Identification: Provide details on how your team plans to identify and define risks to the project. Those details should include who is assigned to specific responsibilities for risk identification and tracking, as well as what information and categories will be included in your team’s project risk register.
• Risk Assessment: Provide details on how your team will assess the probability and potential impact of each risk it has identified. Your team should also include details on any risk matrices it plans to use and how the team will prioritize risks based on those matrices.
• Risk Response: Provide details on the ways your team can choose to respond to various risks. In the case of high-priority risks, that will include prevention or mitigation plans for each risk. In the case of low-priority risks, or risks that might be prohibitively expensive to mitigate, it might include accepting the risk with limited mitigation measures.
• Risk Mitigation: Provide more details on how your team plans to lessen the likelihood  or impact of each risk. Your team should also provide details on how it will monitor the effectiveness of prevention and mitigation strategies, and change them if needed.
• Risk Tracking and Reporting: Provide details on how your team plans to track and report on risks and risk mitigation activities. These details will likely include information on the project risk register your team plans to use and information on how your team plans to periodically report risk and risk responses to organizational leadership.

Do Complex Projects Require More Complex Project Risk Management Plans? 

Experts say that complex projects shouldn’t require more complex project risk management plans. A project might have more complex tools, such as a more detailed risk register, but the risk management plan should cover the same basics for all projects.

“The problem is, most people get these management plans confused. They then start lumping in the artifacts [such as risk registers] — which can be more complex and have more detail — to the risk management plan itself,” says Reynolds. “You want it to be easily understood and easily followed.

“I don't think the complexity of the project changes the risk management plan,” Reynolds says. “You may have to circulate the plan to more people. You may have to meet more frequently. You may have to use quantitative risk analysis. That would be more complex with more complex projects. But the management plan itself —  no.”

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Risk Management Process and Practice – BMAL 714

CG • Section 8WK • 11/08/2019 to 04/16/2020 • Modified 09/05/2023

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Course Description

This course provides an analysis of risk management principles with a focus on the processes of risk management, planning risk management, critical success factors for effective risk management, and performing qualitative and quantitative risk analysis.

For information regarding prerequisites for this course, please refer to the  Academic Course Catalog .

This course is designed to integrate risk into the student’s understanding of strategy. Leadership requires analysis of those factors likely to affect the performance of an organization. Risk analysis tools allow leaders to identify and proactively address both internal and external factors, the extent of the liability, and likelihood of their occurrence. Once that analysis is complete, strategic planning is better informed, creating an opportunity for more strategic leadership.

Course Assignment

Textbook readings and lecture presentations

Course Requirements Checklist

After reading the Course Syllabus and Student Expectations , the student will complete the related checklist found in the Course Overview.

Discussions (4)

Discussions are collaborative learning experiences. Therefore, the student will complete 4 Discussions in this course. The student will post one thread of a maximum of 200 words by 11:59 p.m. (ET) on Sunday of the assigned Module. The student must then post 1 reply of a maximum of 200 words by 11:59 p.m. (ET) on Sunday of the next assigned Module. For each thread, students must support their assertions with at least 2 scholarly citations in APA format. Each reply must incorporate at least 2 scholarly citations in APA format. Any sources cited must have been published within the last five years.

Risk Management Techniques Paper Assignment

The student will write a paper that focuses on risk management techniques. Specifically, the student will choose a project within an organization, evaluate what environmental factors contribute to the risk of that project, and build a risk management plan to address those project risks.

• 10-page length requirement, which should include an abstract of 150-250 words
• Excluded from this length is the title page and reference section
• APA formatted
• 10 references are required in addition to the course textbooks and the Bible
• Acceptable sources include scholarly articles published within the last five years

People and Risk Paper Assignment

The student will write a paper that focuses on the relationship between people, risk, and security. Specifically, the student will choose a particular industry to analyze, build a risk management plan, and evaluate the effectiveness of that plan as it pertains to that industry’s human resources.

• 7-page length requirement, which should include an abstract of 150-250 words
• 5 references are required in addition to the course textbooks and the Bible

Spiritual Risk Paper Assignment

The student will write a paper that focuses on spiritual risk. Specifically, the student will choose one of the kings in either 1 or 2 Kings and evaluate the effectiveness of that king as it pertains to risk management. This paper should also propose a definition of spiritual risk and support that definition using scripture, references, and risk management theory.

Risk Challenges and Integration Paper Assignment

The student will write a paper that integrates the learnings from this course. Specifically, the student will broaden their overall understanding of strategic leadership by building a risk management plan for an organization of their choosing while utilizing the theories of leadership and New Testament scripture. The student should clearly identify the risks and the plan to address them.

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Risk Assessment Matrix 2023

project-management.com content and product recommendations are editorially independent. We may make money when you click on links to our partners. Learn More .

Research shows that over 60% of projects are late, over budget, or fail to deliver to specifications. Furthermore, we know that risks can impact the scope, budget, timeline, and resources of a project. Here, we will review how to identify and assess potential project threats and how a Risk Assessment Matrix is a necessary tool that should be used to achieve the best outcome for your projects.

Although we cannot foresee every threat to a project, if we implement established and efficient risk management methods, such as a Risk Assessment Matrix, to evaluate the potential damage or interruption caused by those risks, we have the power to lessen the downstream impact of the risks identified. Thus, the overall project success rate is likely to improve.

Read more: What Is Project Quality Management?

Table of Contents

What is a risk assessment matrix, how to create a risk assessment matrix, risk assessment matrix templates, why it’s important to identify risks.

A Risk Assessment Matrix is a straightforward, easy-to-read visual medium that provides insight into project risks by categorizing them by their likelihood of occurrence and the severity of their impact. A Risk Assessment Matrix is used to:

• Identify potential risks while considering both internal and external factors
• Present complex information in a simplified format to make it easier to assess issues and drive decision making
• Prioritize project actions and assist in strategic planning
• Provide project members and stakeholders with a snapshot of factors with the potential to affect project outcome

Read more on TechnologyAdvice: The Most Innovative Project Management Strategies

1. Isolate all potential issues that threaten project progress

First, you should identify all internal and external factors that have the potential to seep into the project and cause issues. This may include resource availability, financial factors, and scope creep — just to name a few.

Getting the entire project team and stakeholders together to brainstorm can be an effective way to ensure you are assessing all angles of impact and that there is due diligence in properly identifying all potential risks.

2. Assess and categorize each risk in terms of likelihood and severity

Once you have listed all project risks, you’ll want to add these risks to the Risk Assessment Matrix. To do so, you must first define your risk criteria. In terms of severity, decide what you consider major or catastrophic versus what would be considered negligible. You will make the same assessment when defining how to scale the likelihood of a risk occurring.

Next, assign a numerical value to each identified risk. Generally, risks are assigned on a scale from one through five, with one being the least severe/frequent and five being the most extreme. Note that this can be very nuanced and should be tailored to your specific organizational needs, the industry in which you work, or the size of the project.

3. Prioritize and create a plan of attack

After you have created your Risk Assessment Matrix, the next step is to prioritize each risk and to begin putting a strategic plan in place. You should decide the sequence in which you plan to handle each risk, in accordance with their importance to your project and organization. These preemptive measures will help you get a grip on your project risks on the front end.

Read more on eWeek: Do We Need a New Approach to Accounting for Business Risk?

Check out these resources to help you get started on your Risk Assessment Matrix:

• Someka Risk Assessment Matrix Template
• Smartsheet Risk Assessment Matrix Template
• Team Gantt Risk Assessment Matrix Template

Risks in project management are defined as unexpected issues that can occur throughout a project and have the potential to affect the project outcome. It’s a rare occurrence that a project is executed without running into a problem, big or small. As a project manager, it is your responsibility to identify potential risks and ways to manage and mitigate said risks.

For example, suppose that a supplier says the microchips you ordered no longer meet specifications due an updated government regulation. You now must find a new supplier. This could be considered a major risk that would have the potential to hinder your entire project.

Now, rewind to the start of the project and consider that during the planning stage, you took the time to analyze potential risks and identified there was a possibility for the government to update standards during the current year. Although the cost of the chips is more expensive than your first-choice supplier, you find a supplier that produces microchips that already meet the upcoming standards, so you decide to go with that supplier instead. Crisis averted!

The Project Management Institute (PMI) maintains that risk analysis and management are “a vital key to effective project management.” Because we live in a world of unpredictability, it is essential that today’s project managers have a comprehensive understanding of the risks their organization faces. Risk analysis is a crucial part of project management because it lessens the chance of unforeseen issues threatening to derail your project.

A Risk Assessment Matrix is a highly effective, yet easy way to tackle your project risks at the onset and increase the likelihood of your project being successful.

Read next: Types of Risk in Project Management

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How to Make a Risk Management Plan (Template Included)

You identify them, record them, monitor them and plan for them: risks are an inherent part of every project. Some project risks are bound to become problem areas—like executing a project over the holidays and having to plan the project timeline around them. But there are many risks within any given project that, without risk assessment and risk mitigation strategies, can come as unwelcome surprises to you and your project management team.

That’s where a risk management plan comes in—to help mitigate risks before they become problems. But first, what is project risk management ?

What Is Risk Management?

Risk management is an arm of project management that deals with managing potential project risks. Managing your risks is arguably one of the most important aspects of project management.

The risk management process has these main steps:

• Risk Identification: The first step to manage project risks is to identify them. You’ll need to use data sources such as information from past projects or subject matter experts’ opinions to estimate all the potential risks that can impact your project.
• Risk Assessment: Once you have identified your project risks, you’ll need to prioritize them by looking at their likelihood and level of impact.
• Risk Mitigation: Now it’s time to create a contingency plan with risk mitigation actions to manage your project risks. You also need to define which team members will be risk owners, responsible for monitoring and controlling risks.
• Risk Monitoring: Risks must be monitored throughout the project life cycle so that they can be controlled.

If one risk that’s passed your threshold has its conditions met, it can put your entire project plan in jeopardy. There isn’t usually just one risk per project, either; there are many risk categories that require assessment and discussion with your stakeholders.

That’s why risk management needs to be both a proactive and reactive process that is constant throughout the project life cycle. Now let’s define what a risk management plan is.

What Is a Risk Management Plan?

A risk management plan defines how your project’s risk management process will be executed. That includes the budget , tools and approaches that will be used to perform risk identification, assessment, mitigation and monitoring activities.

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Risk Management Plan Template

Use this free Risk Management Plan Template for Word to manage your projects better.

A risk management plan usually includes:

• Methodology: Define the tools and approaches that will be used to perform risk management activities such as risk assessment, risk analysis and risk mitigation strategies.
• Risk Register: A risk register is a chart where you can document all the risk identification information of your project.
• Risk Breakdown Structure: It’s a chart that allows you to identify risk categories and the hierarchical structure of project risks.
• Risk Assessment Matrix: A risk assessment matrix allows you to analyze the likelihood and the impact of project risks so you can prioritize them.
• Risk Response Plan: A risk response plan is a project management document that explains the risk mitigation strategies that will be employed to manage your project risks.
• Roles and responsibilities: The risk management team members have responsibilities as risk owners. They need to monitor project risks and supervise their risk response actions.
• Budget: Have a section where you identify the funds required to perform your risk management activities.
• Timing: Include a section to define the schedule for the risk management activities.

How to Make a Risk Management Plan

For every web design and development project, construction project or product design, there will be risks. That’s truly just the nature of project management. But that’s also why it’s always best to get ahead of them as much as possible by developing a risk management plan. The steps to make a risk management plan are outlined below.

1. Risk Identification

Risk identification occurs at the beginning of the project planning phase, as well as throughout the project life cycle. While many risks are considered “known risks,” others might require additional research to discover.

You can create a risk breakdown structure to identify all your project risks and classify them into risk categories. You can do this by interviewing all project stakeholders and industry experts. Many project risks can be divided up into risk categories, like technical or organizational, and listed out by specific sub-categories like technology, interfaces, performance, logistics, budget, etc. Additionally, create a risk register that you can share with everyone you interviewed for a centralized location of all known risks revealed during the identification phase.

You can conveniently create a risk register for your project using online project management software. For example, use the list view on ProjectManager to capture all project risks, add what level of priority they are and assign a team member to own identify and resolve them. Better than to-do list apps, you can attach files, tags and monitor progress. Track the percentage complete and even view your risks from the project menu. Keep risks from derailing your project by signing up for a free trial of ProjectManager.

2. Risk Assessment

In this next phase, you’ll review the qualitative and quantitative impact of the risk—like the likelihood of the risk occurring versus the impact it would have on your project—and map that out into a risk assessment matrix

First, you’ll do this by assigning the risk likelihood a score from low probability to high probability. Then, you’ll map out your risk impact from low to medium to high and assign each a score. This will give you an idea of how likely the risk is to impact the success of the project, as well as how urgent the response will need to be.

To make it efficient for all risk management team members and project stakeholders to understand the risk assessment matrix, assign an overall risk score by multiplying your impact level score with your risk probability score.

3. Create a Risk Response Plan

A risk response is the action plan that is taken to mitigate project risks when they occur. The risk response plan includes the risk mitigation strategies that you’ll execute to mitigate the impact of risks in your project. Doing this usually comes with a price—at the expense of your time, or your budget. So you’ll want to allocate resources, time and money for your risk management needs prior to creating your risk management plan.

4. Assign Risk Owners

Additionally, you’ll also want to assign a risk owner to each project risk. Those risk owners become accountable for monitoring the risks that are assigned to them and supervising the execution of the risk response if needed.

Related: Risk Tracking Template

When you create your risk register and risk assessment matrix, list out the risk owners, that way no one is confused as to who will need to implement the risk response strategies once the project risks occur, and each risk owner can take immediate action.

Be sure to record what the exact risk response is for each project risk with a risk register and have your risk response plan it approved by all stakeholders before implementation. That way you can have a record of the issue and the resolution to review once the entire project is finalized.

5. Understand Your Triggers

This can happen with or without a risk already having impacted your project—especially during project milestones as a means of reviewing project progress. If they have, consider reclassifying those existing risks.

Even if those triggers haven’t been met, it’s best to come up with a backup plan as the project progresses—maybe the conditions for a certain risk won’t exist after a certain point has been reached in the project.

6. Make a Backup Plan

Consider your risk register and risk assessment matrix a living document. Your project risks can change in classification at any point during your project, and because of that, it’s important you come up with a contingency plan as part of your process.

Contingency planning includes discovering new risks during project milestones and reevaluating existing risks to see if any conditions for those risks have been met. Any reclassification of a risk means adjusting your contingency plan just a little bit.

7. Measure Your Risk Threshold

Measuring your risk threshold is all about discovering which risk is too high and consulting with your project stakeholders to consider whether or not it’s worth it to continue the project—worth it whether in time, money or scope .

Here’s how the risk threshold is typically determined: consider your risks that have a score of “very high”, or more than a few “high” scores, and consult with your leadership team and project stakeholders to determine if the project itself may be at risk of failure. Project risks that require additional consultation are risks that have passed the risk threshold.

To keep a close eye on risk as they raise issues in your project, use project management software. ProjectManager has real-time dashboards that are embedded in our tool, unlike other software where you have to build them yourself. We automatically calculate the health of your project, checking if you’re on time or running behind. Get a high-level view of how much you’re spending, progress and more. The quicker you identify risk, the faster you can resolve it.

Free Risk Management Plan Template

This free risk management plan template will help you prepare your team for any risks inherent in your project. This Word document includes sections for your risk management methodology, risk register, risk breakdown structure and more. It’s so thorough, you’re sure to be ready for whatever comes your way. Download your template today.

Best Practices for Maintaining Your Risk Management Plan

Risk management plans only fail in a few ways: incrementally because of insufficient budget, via modeling errors or by ignoring your risks outright.

Your risk management plan is one that is constantly evolving throughout the course of the project life cycle, from beginning to end. So the best practices are to focus on the monitoring phase of the risk management plan. Continue to evaluate and reevaluate your risks and their scores, and address risks at every project milestone.

Project dashboards and other risk tracking features can be a lifesaver when it comes to maintaining your risk management plan. Watch the video below to see just how important project management dashboards, live data and project reports can be when it comes to keeping your projects on track and on budget.

In addition to your routine risk monitoring, at each milestone, conduct another round of interviews with the same checklist you used at the beginning of the project, and re-interview project stakeholders, risk management team members, customers (if applicable) and industry experts.

Record their answers, adjust your risk register and risk assessment matrix if necessary, and report all relevant updates of your risk management plan to key project stakeholders. This process and level of transparency will help you to identify any new risks to be assessed and will let you know if any previous risks have expired.

How ProjectManager Can Help With Your Risk Management Plan

A risk management plan is only as good as the risk management features you have to implement and track them. ProjectManager is online project management software that lets you view risks directly in the project menu. You can tag risks as open or closed and even make a risk matrix directly in the software. You get visibility into risks and can track them in real time, sharing and viewing the risk history.

Tracking & Monitor Risks in Real Time

Managing risk is only the start. You must also monitor risk and track it from the point that you first identified it. Real-time dashboards give you a high-level view of slippage, workload, cost and more. Customizable reports can be shared with stakeholders and filtered to show only what they need to see. Risk tracking has never been easier.

Risks are bound to happen no matter the project. But if you have the right tools to better navigate the risk management planning process, you can better mitigate errors. ProjectManager is online project management software that updates in real time, giving you all the latest information on your risks, issues and changes. Start a free 30-day trial and start managing your risks better.

Deliver your projects on time and under budget

Start planning your projects.

Risk management is the process of identifying, assessing and controlling financial, legal, strategic and security risks to an organization’s capital and earnings. These threats , or risks, could stem from a wide variety of sources, including financial uncertainty, legal liabilities, strategic management errors, accidents and natural disasters.

If an unforeseen event catches your organization unaware, the impact could be minor, such as a small impact on your overhead costs. In a worst-case scenario, though, it could be catastrophic and have serious ramifications, such as a significant financial burden or even the closure of your business.

To reduce risk, an organization needs to apply resources to minimize, monitor and control the impact of negative events while maximizing positive events. A consistent, systemic and integrated approach to risk management can help determine how best to identify, manage and mitigate significant risks.

At the broadest level, risk management is a system of people, processes and technology that enables an organization to establish objectives in line with values and risks.

A successful risk assessment program must meet legal, contractual, internal, social and ethical goals, as well as monitor new technology-related regulations. By focusing attention on risk and committing the necessary resources to control and mitigate risk, a business will protect itself from uncertainty, reduce costs and increase the likelihood of business continuity and success. Three important steps of the risk management process are risk identification, risk analysis and assessment, and risk mitigation and monitoring.

Risk identification is the process of identifying and assessing threats to an organization, its operations and its workforce. For example, risk identification may include assessing IT security threats such as malware and ransomware, accidents, natural disasters and other potentially harmful events that could disrupt business operations.

Risk analysis involves establishing the probability that a risk event might occur and the potential outcome of each event. Risk evaluation compares the magnitude of each risk and ranks them according to prominence and consequence.

Risk mitigation refers to the process of planning and developing methods and options to reduce threats to project objectives. A project team might implement risk mitigation strategies to identify, monitor and evaluate risks and consequences inherent to completing a specific project, such as new product creation. Risk mitigation also includes the actions put into place to deal with issues and effects of those issues regarding a project.

Risk management is a nonstop process that adapts and changes over time. Repeating and continually monitoring the processes can help assure maximum coverage of known and unknown risks.

There are five commonly accepted strategies for addressing risk. The process begins with an initial consideration of risk avoidance then proceeds to three additional avenues of addressing risk (transfer, spreading and reduction). Ideally, these three avenues are employed in concert with one another as part of a comprehensive strategy. Some residual risk may remain.

Avoidance is a method for mitigating risk by not participating in activities that may negatively affect the organization. Not making an investment or starting a product line are examples of such activities as they avoid the risk of loss.

This method of risk management attempts to minimize the loss, rather than completely eliminate it. While accepting the risk, it stays focused on keeping the loss contained and preventing it from spreading. An example of this in health insurance is preventative care.

When risks are shared, the possibility of loss is transferred from the individual to the group. A corporation is a good example of risk sharing — a number of investors pool their capital and each only bears a portion of the risk that the enterprise may fail.

Contractually transferring a risk to a third-party, such as, insurance to cover possible property damage or injury shifts the risks associated with the property from the owner to the insurance company.

After all risk sharing, risk transfer and risk reduction measures have been implemented, some risk will remain since it is virtually impossible to eliminate all risk (except through risk avoidance). This is called residual risk.

Risk management standards set out a specific set of strategic processes that start with the objectives of an organization and intend to identify risks and promote the mitigation of risks through best practice. Standards are often designed by agencies who are working together to promote common goals, to help to ensure high-quality risk management processes. For example, the ISO 31 000 standard on risk management is an international standard that provides principles and guidelines for effective risk management.

While adopting a risk management standard has its advantages, it is not without challenges. The new standard might not easily fit into what you are doing already, so you could have to introduce new ways of working. And the standards might need customizing to your industry or business. 

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StatPearls [Internet]. Treasure Island (FL): StatPearls Publishing; 2023 Jan-.

StatPearls [Internet].

Risk management event evaluation and responsibilities.

Joel McGowan ; Amanda Wojahn ; Joseph R. Nicolini .

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Last Update: February 6, 2023 .

• Continuing Education Activity

Risk management in healthcare is a complex set of clinical and administrative systems, processes, procedures, and reporting structures designed to detect, monitor, assess, mitigate, and prevent risks to patients. Currently, the numerous risk management practices and processes that occur in healthcare organizations are a response to The Institute of Medicine’s ("IOM") report entitled "To Err is Human: Building a Safer Health System." This activity reviews the evaluation of risks and highlights the interprofessional team's role in managing and minimizing risks in the healthcare setting.

• Describe common procedures in risk management.
• Summarize the key definitions of terms involved in risk management.
• Outline why risk management is important to clinical practice.
• Review how an interprofessional team can work together to mitigate risk and improve outcomes.
• Introduction

Risk management in healthcare is a complex set of clinical and administrative systems, processes, procedures, and reporting structures designed to detect, monitor, assess, mitigate, and prevent risks to patients. Currently, the numerous risk management practices and processes that occur in healthcare organizations are a response to The Institute of Medicine’s (“IOM”) report entitled “To Err is Human: Building a Safer Health System.” [1]

In the report, the IOM noted that approximately 98,000 people die in any given year from medical errors while in the hospital. As a result of the report, Congress enacted the Patient Safety and Quality Improvement Act (“PSQIA”) of 2005 (hereafter referred to as “The Act”). [2]

Legal commentators reviewed the impact of The Act and articulated several of its key principles and responsibilities. [3] These duties include:

• Provision for the certification and recertification of Patient Safety Organizations (“PSO’s”)
• Collection and dissemination of information related to patient safety
• Establishment of a patient safety database
• Facilitation of the development of consensus among healthcare providers, patients, and other interested parties concerning patient safety and recommendations to improve patient safety
• Provision of technical assistance to states that have (or are developing) medical-error reporting systems
• Provision of assistance to the states in developing standardized methods for data collection and data collection from state reporting systems for inclusion in the patient safety database.

The fundamental goal of this act was to increase the nation’s overall patient safety by encouraging confidential and voluntary reporting of adverse events that affected patients. Policymakers theorized that the systematic collection of medical-error data could achieve improved patient safety. The awareness of such error-data by health care providers and administrators would lead to the prevention of errors and the global reduction of their recurrence. [4]

Relevant Definitions

Sentinel Event: Defined by the Joint Commission as “a patient safety event that results in death, permanent harm, or severe, temporary harm” (The Joint Commission 2017). These events are typically unrelated to the patient’s illness/underlying condition. It is important to note that the Joint Commission requires each accredited organization to establish its own definition for a sentinel event to prevent, review, and respond to these occurrences.   

Medical Error: The failure of a planned action to be completed as intended or using a wrong plan to achieve an aim. [1] In the context of this article, medical errors may fall under the definition of sentinel events if the error is severe enough.

Root Cause Analysis: The process for identifying the basic or causal factor(s) underlying variation in performance. Also established by the Joint Commission, this multi-step process is crucial to identify and fix systemic problems in patient safety and care.

Risk Management: Clinical and administrative activities undertaken to identify, evaluate, and reduce the risk of injury to patients, staff, and visitors and the risk of loss to the organization itself (The Joint Commission 2017).

Why Is This Important To Clinical Practice?

The healthcare system is made up of individual players, but its ultimate goals of patient care and safety are accomplished through teamwork. Likewise, when medical errors occur, though they may result from an individual’s actions, the appropriate next steps fall on the institution to identify, learn from, and improve on the prevention of such events. This process focuses on systemic policy changes, not individual performances, to progress.

For example, consider an emergency room triage system that primarily relies on color-coded wristbands to stratify patients who present with various complaints. When given a red wristband, this signifies to a healthcare provider that a patient needs immediate medical care. A white wristband may signify that there is no real urgency, etc. Many hospitals utilize such systems to manage a hectic emergency department efficiently. [5]

Imagine that a real estate conference is being held in a busy downtown. Attendees are required to wear a purple wristband for admission to the event. At one point in the evening, a 65-year-old conference attendee with a significant medical history for hypertension, diabetes, and hyperlipidemia begins to feel crushing, substernal chest pain. He drives himself to the local hospital and awaits care in triage. It is 7:00 PM on a Friday night, and a shift change has just occurred. Moments later, the patient stops breathing. The nurse who just began her shift rushes to the patient’s side and notices a purple wristband. Mistaking it for a Do Not Resuscitate (DNR) band, she doesn’t call the code. [6]

It is clear to see that this was one individual’s medical error in misidentifying a patient’s wristband, resulting in a sentinel event. However, what if, to check in to the ED, a front desk employee’s responsibility was to give patients the appropriate, color-coded wristband and to check for any bracelets/bands that a patient may be wearing? Medical errors are likely to happen in this environment, but systems-based safety policies, though loaded with redundancies, can reduce the chances that such a medical error progresses any further.

How pervasive is this issue? In 1999, a monumental report was released by the U.S. Institute of Medicine that brought to light the significant issue of medical errors. By their estimates, between 44,000 and 98,000 patients die each year from preventable medical errors. [1] Throughout the years, many academic papers have attempted to quantify or rank medical error as a leading cause of death in the United States. Though the Joint Commission releases an annual report summarizing the sentinel events reviewed by the committee, they include a caveat that these submissions by accredited institutions are encouraged, but not required. Therefore, the true number of sentinel events is difficult to pinpoint, and statistical conclusions cannot be accurately drawn. Nonetheless, the importance of identifying, reviewing, and learning from sentinel events cannot be undersold. Not only would an increase in sentinel event reporting result in a more accurate epidemiological picture of medical error in the United States, but hospitals would benefit from a culture of transparency and proactivity that promotes patient safety at all costs.  

• Issues of Concern

How Are Sentinal Events Prevented?

Sentinel event prevention is a team sport. Research has previously shown the creation of a culture where anyone, regardless of perceived status or importance, is welcomed to contribute their concerns regarding patient safety. [7] This team includes physicians, physician assistants and nurse practitioners, nurses, nursing assistants/medical technicians, hospital support staff, patients, and patients' family members. Each of these individuals is involved in a specific component of medical care and see a different aspect of a patient's interaction with the medical system. With this in mind, the only way to comprehensively ensure that a sentinel event is recognized is by creating a system in which everyone is empowered to speak up. This culture must be pervasive - from the highest hospital administrator to the newest volunteer, patient safety-focused training must begin on day one of the new hire orientation and be reinforced frequently throughout an employee's career. [7]  There are varied methods via which hospital systems seek to create this team approach to patient safety; however, the foundational concept is one of empowering employees, patients, and visitors to participate.

The priority of sentinel event prevention is ensuring an accurate understanding of what constitutes a sentinel event. This is a specific subcategory within the broader concept of medical error. As stated in the definitions above and according to The Joint Commission, a sentinel event is "a patient safety event that results in death, permanent harm, or severe temporary harm" (The Joint Commission, 2017).

Even an exhaustive list of day-to-day medical care areas that can precipitate a sentinel event would still be incomplete. Commonly cited high-risks processes include (AHRQ, 2017; [1] ):

• Verifying surgical site
• Specimen mislabeling
• Medication errors: Correct medication, correct dose, correct patient
• Equipment failure/misuse: IV pump rates, IV tubing, securing in-dwelling devices
• Indwelling device infections: urinary catheters, central venous catheters, percutaneously inserted central venous catheters, provider hand hygiene
• Provider sleep deprivation
• Provider-to-provider turnover
• Inadequate staffing/high patient volumes per provider
• Diagnostic error
• Patient falls

The simple fact is that modern medical care is fraught with risk. The landmark publication, "To Err is Human: Building a Safer Health System," first released in 1999 by the US Institute of Medicine, was the first of its kind to acknowledge this fact. [1] This report focuses on the epidemic of medical error, seeking not to place blame on individuals but identify systems-level failures and suggest areas to improve. It acknowledges that human beings make mistakes - whether due to fatigue, stress, or working conditions, this fact is unavoidable. It states, "there are not bad people in healthcare, but good people working in bad systems that need to be made safer." This report seeks to spur systems-level protections to minimize the opportunity for human error. Ultimately, this set forth a nation-wide agenda to improve patient safety. 

While each of the high-risk areas listed above individually deserves article-length attention, this article's focus will be on three exemplary situations - patient handoff, medication errors, and wrong-site/wrong-patient procedures. 

Patient Handoff

Many hospital systems have adopted standardized communication systems, particularly for provider-to-provider turnover. This process has previously been shown to contribute heavily to medical error and poor patient safety. [1] [8]  The most ubiquitous example is the TeamSTEPPS Curriculum ("Advances in Patient Safety," AHRQ, 2008) - an evidence-based patient turnover framework developed by the Department of Defence (DOD) and Agency for Healthcare Research and Quality (AHRQ). This curriculum yielded the "I-PASS" standardized approach to patient turnover. This is a mnemonic for the passage of critical patient information to be passed between providers during turnover (Figure 1, "I-PASS" template). 

I - Illness severity: "stable", "watcher", "unstable"

P - Patient summary

A - Action list: "to-do list" and timeline

S - Situation awareness and contingency planning: planning for "what might happen"

S - Synthesis by the receiver: summarizes back to off-going staff, repeats action list

For example, handoff of a patient following the "I-PASS" system would be structured as follows: "This patient is a watcher. Ms. X is a 65-year-old female, anticoagulated on apixaban, who presented to the ED after a mechanical fall. She was neurologically intact, but her head CT showed a subdural hematoma without midline shift, so she was admitted to the ICU. She needs neurological checks every 1 hour and a repeat head CT in 4 hours. Should she have an acute mental status change, please plan to reverse her anticoagulation, consider intubating her and giving hypertonic saline, obtain a STAT head CT, and contact neurosurgery immediately. "After this, the receiving provider would summarize the patient and repeat the action points back to ensure proper understanding.

The I-PASS patient handoff system has been successfully implemented at the physician and nursing levels. It has shown positive results concerning patient safety and avoidance of medical errors in both adult and pediatric medicine. [9] [10] [11] [12] [13] [14]

Wrong-Site/Wrong-Patient Procedures

Wrong-site and wrong-patient procedures were identified in "To Err is Human" as a particularly devastating example of medical error and patient harm. This information ultimately led to a massive undertaking to improve safety in the surgical arena. In 2009, the World Health Organization (WHO) was the first to release a "surgical checklist" of critical patient information that must undergo verification before initiation of a surgical procedure (Figure 2, "WHO Surgical Checklist"). This is a "pre-op," "intra-op," and "post-op" process that makes patient safety the number one priority in the operating room. The checklist includes "check-boxes" such as:

• Confirmation of patient identify
• Marking of the correct surgical site
• Verifying functional cardiopulmonary monitors and anesthesia machine
• Allergy review
• Airway assessment
• Review of all surgical team members and assigned roles
• Expected blood loss
• Prophylactic antibiotic administration
• Verification of the procedure performed
• Anticipated recovery concerns

This checklist has been adjusted and modified countless times by hospital systems as well as national governing bodies such as the Association of Perioperative Registered Nurses (AORN), American Academy of Orthopedic Surgeons (AAOS), American Society of Anesthesiologists (ASA), the American College of Surgeons (ACS), and countless others. This approach is now standard-of-care in modern surgical medicine. Checklist implementation has citations as one the single most effective patient safety measures to date. [15] [16] [17] [18]

Medication Errors

Medication-related errors have long been cited as a cause of patient harm - this includes incorrect medication administration, incorrect dosing, and administration of medications to which patients have documented allergy. [19] [20] While responsibility certainly falls on individuals to verify correct medication, correct dose, and patient allergies before ordering and administering medication, this topic was also covered in "To Err is Human" and an area for systems-level improvement. The advent and wide-spread implementation of Electronic Medical Records (EMRs) have been imperative to developing protections against medication errors. EMRs could verify the correct dosage based on a patient's weight, verify the dosing frequency, and provide an alert if a medication ordered conflicts with the patient's allergy list. [21]  These are systems protection at the time of the physician ordering medication; EMRs also provide levels of protection for nursing colleagues. Many hospitals have implemented a barcode scanning system in which a patient identification wristband has a barcode that must be scanned to verify the identity and accuracy of the medication prior to administration by the nurse. [22] [23]  Finally, many hospitals have increased pharmacist availability and visibility as an additional step to prevent medication-related errors; this includes 24-hour pharmacist consultation by phone, pharmacist review and sign-off on all medication orders, and physical presence of a clinical pharmacist in higher risk areas of medicine, such as intensive care and emergency medicine. [24] [25] [26]  These systems-level protections all seek to fulfill the goal outlined in "To Err is Human" - to minimize the opportunity for human error by creating a multi-layered system of protection around providers and patients. 

To prevent sentinel events, a hospital system must first accept that human error is inevitable and, to some degree, unavoidable. As introduced in "To Err is Human," the focus must shift from blaming individuals for human error and, instead, developing a multi-faceted system and culture of protection surrounding providers and patients. Successful examples of this approach include standardization of patient handoff, perioperative checklists, use of EMRs to verify accurate medications, and increased visibility and involvement of pharmacists. Overall, hospital-systems that succeed in patient safety share one key feature - a positive, supportive, and collaborative culture that encourages every employee, patient's family member, and the individual patient to participate. [27] [28] [29] [8]

The Proper Response To A Sentinal Event

When a sentinel event occurs, an organization must take two important actions. The first involves a comprehensive systems-based investigation into the causative factors of the event, known as a root cause analysis, or RCA. This goal of RCA is to develop a robust, corrective action plan that will not only address the current event but also will implement changes that prevent future sentinel events. This method successfully shifts focus away from an individual's errors and onto policies or lack thereof that may have contributed to the incident. Root cause analysis can work in conjunction with a single sentinel event, but it may be applicable in analyzing several lower-risk medical error occurrences as well. For example, in a Danish study of 40 randomly selected community pharmacies, a root-cause analysis was employed to investigate over 400 separate medical errors. [30]  The results identified four chief causes of medical error:

• Illegible handwritten prescriptions
• Misleading packaging labels, strengths, or dosages of medications
• Lack of effective control of prescription label and medicine
• Lack of concentration caused by interruptions

Since 1997, the Joint Commission has provided materials to accredited institutions to help establish individual sentinel event policies and work through a root cause analysis. Central to this process are three questions:

• What happened?
• Why did it happen?
• What are the latent conditions?

Latent conditions can be defined as the elements of a healthcare system's inherent design that can either contribute to or prevent medical error and sentinel events. One author describes these conditions as pertaining to "the 6 P's." [31]

• Providers: unfamiliarity with new procedures, hospital layout, or policies
• Procedures: inherent risks involved
• Products: the complexity of medical devices, variability in branding, names, etc
• Peripherals: hospital infrastructure, environmental factors
• Patients: capable of preventing accidental treatment
• Policy: outdated regulations, unnecessary complexity

In answering the three questions above, an institution can identify specific causes that may be amenable to solutions. However, root cause analysis has not been immune to criticism. A 2017 retrospective study published in the BMJ Quality and Safety journal examined over three hundred root cause analyses in an eight-year period. The three most common event types involved a procedure complication, cardiopulmonary arrest, and neurological deficits. In 106 RCAs, action plans were proposed. The most common solution types were training (20%), process change (19.6%), and policy reinforcement (15.2%). The study concluded that "the most commonly proposed solutions were weaker actions, which were less likely to decrease event recurrence." [32]  The trouble seemed to be more with the effectiveness of the action plan than the methods by which solutions were reached. An opinion piece published in JAMA in 2008 proposed:

"...many recommendations stemming from RCAs should focus at the level of the healthcare system to prevent the inefficiencies of having individual institutions recycle the same discussions locally. This conversation would require greater collaboration among relevant national stakeholders to develop and share mechanisms for deploying scarce implementation resources." [33]

In 2015, the National Patient Safety Foundation convened to provide an updated definition for root cause analysis, based on substantive feedback on the lack of success in implementing its results. "Root cause analysis and actions" was determined to provide an appropriate emphasis on preventing patient harm through action. [34]  Their recommendations included forming a diverse, 4 to 6 member team within 72 hours of recognizing that an RCA is necessary. Though the individuals directly associated with the sentinel event are not included on the team, the RCA committee must interview those individuals. The National Patient Safety Foundation hoped that these new recommendations would place heavier importance on actual outcomes and results from root cause analyses.

Once a root cause analysis has been performed, and the provocating factors that led to the sentinel event have been identified, a corrective action plan must be established and put into effect. The Joint Commission defines an effective action plan as one that addresses:

• Identification of corrective actions to eliminate or control system hazards or vulnerabilities directly related to causal and contributory factors
• Responsibility for implementation
• Timelines for completion
• Strategies for evaluating the effectiveness of the actions
• Strategies for sustaining the change

The accredited institution submits a root cause analysis and corrective action plan to the Joint Commission for review. If deemed acceptable, the Joint Commission will assign a follow-up activity to gauge the action plan's success and determine if the institution's accreditation is in jeopardy due to compliance issues. This objective measurement is known as a Sentinel Event Measure of Success (SE MOS) (The Joint Commission 2020). Through these efforts, hospitals may benefit from a culture of transparency and teamwork with systems-based patient safety protocols capable of investigating and preventing sentinel events.

• Clinical Significance

Risk management requires each provider to be aware of the inherent risk and benefits of care of the patient and a goal among all providers to "first do no harm". Working together as a team will improve patient outcomes and mitigate risks.

• Enhancing Healthcare Team Outcomes

Risk management requires the efforts of a complete, top-down interprofessional team, both in terms of implementing policies and practices, executing them in day to day patient care, and even when addressing medical errors that have occurred. A coordinated team approach where everyone is on the same team and empowered to express their concerns irrespective of "rank," and members are knowledgable about their duties, offers the best chance for successful risk mitigation. This interprofessional approach leads to enhanced patient care and a reduction in potentially catastrophic events.

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Disclosure: Joel McGowan declares no relevant financial relationships with ineligible companies.

Disclosure: Amanda Wojahn declares no relevant financial relationships with ineligible companies.

Disclosure: Joseph Nicolini declares no relevant financial relationships with ineligible companies.

This book is distributed under the terms of the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International (CC BY-NC-ND 4.0) ( http://creativecommons.org/licenses/by-nc-nd/4.0/ ), which permits others to distribute the work, provided that the article is not altered or used commercially. You are not required to obtain permission to distribute this article, provided that you credit the author and journal.

• Cite this Page McGowan J, Wojahn A, Nicolini JR. Risk Management Event Evaluation and Responsibilities. [Updated 2023 Feb 6]. In: StatPearls [Internet]. Treasure Island (FL): StatPearls Publishing; 2023 Jan-.

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Assignment 7 - Risk Identification and Analysis

Timing : This assignment spans two weeks Submittal : See Canvas Calendar for Submittal Date Target Word Count : 1500-2500 words (this is just a target to provide a general idea on level of detail) Total Points:  70 points - see rubric for details

Assignment 7 will also be completed as a team assignment. Teams for Assignment 7 will be the same as those assigned for Assignment 6 . At the beginning of or prior to Week 8, the team should assign a different team leader to coordinate the team's work on Assignment 7. This Assignment follows work that you have already carried out in planning and preparing for the City of Metropolis Geodatabase Development Project in past assignments. Assignment 7 is to identify project risks, prepare a risk probability matrix, and carry out an analysis of selected risks (one for each team member). As described in Assignment 6, you may use any appropriate communication and group collaboration tools to support your work on this Assignment.

Your team represents the City’s contractor selected by the City to carry out the City of Metropolis Geodatabase Design and Development Project. Your company's senior management and the City's Project Manager have requested that you prepare a risk management plan that identifies potential risks and identifies risk management strategies. From the course content and readings, you know that the overall purpose of risk planning is to anticipate possible risk events and be ready to take appropriate action when risk events occur—to eliminate or reduce negative impacts on the project.

Your Submittal for Assignment 7

You may wish to begin this exercise with a brainstorming session about potential risks to get candidate risks “on the table” for consideration by the team, and then identify and refine that wording for risks that have some realistic chance of occurring in this project. For example, potential weather problems present a real obstacle to completing field data collection by the planned completion date. It is also an issue that the project manager will ultimately have to plan for, as opposed to other issues that may more align with company policy, such as employee retention policies. Also, a major disaster (e.g., your office burning down), is not a high-enough probability event that requires much time in planning. As described below, you will select several of the identified risks and carry out a risk analysis.

Your team will use the distilled list of risks to make a risk matrix (see Figure 8-1 for an example). The matrix will have at least three classes (high/medium/low) for probability and impact, but you may include more classes if you like. All team members should contribute to identifying risks and organizing them into the matrix. Remember that it is important to name risks effectively—use words that describe the risk event and point to the impact on the project (e.g., “injury of field technician disrupts data collection work”) After completion of the risk matrix, each team member should then select one of the identified risks which the team finds critical to the project. The team members will carry out and document a risk analysis for their selected risk.

In summary, the Risk Management Plan you submit should cover the following main parts:

• Cover page with prominent title and all necessary information identifying the course, assignment, author, and date. The main title of the document should be "RISK MANAGEMENT PLAN". The Cover Page should also reference "City of Metropolis" and the full project name and the name of your company. At the bottom of the Cover Page (right side is best), include the course name and number, assignment number, Team number and team members, and date.
• Table of Contents
• Summary of the project and its deliverables so the reader can understand the context for risk management in this project
• Explanation of risk management with a description of key terms (e.g., risk, risk event, risk response strategy, etc.). Make reference to the PMI PMBok
• Risk identification with a list of all identified risks (for all aspects and deliverables of the project) organized into risk categories (e.g., "Technical/Operational"). This list should show the risk ID number and a descriptive name* of the risk. You can decide on your own risk categories. You should use an alphanumeric risk numbering scheme where the alpha code represents the risk category and sequential numbering within each category (e.g., TO1, TO2, etc.). You can decide on your own categories but the categories should be described. At a minimum this section whould include the categorized names of risks but additional points will be awarded if you include a brief description of the risk (table format is good for this). That description can be one or two sentecnes that explain the risk event, condition, or circumstance and how it could impact the project.
• Risk matrix similar to that shown in Figure 8-1 with classification for Impact and Probability. Be sure to include and introduction on what the purpose of the matrix is and how it suports project planning and provides a basis for managing the project.  It is importnt to includes a description of what "Probability" and "Impact" mean in the context of the project. The classes (e.g., Low, Medium, High) should be described. If you want to add a "Very High" category that is OK. While these categories (H, M, L) are qualitative in nature, your description of them should give a picture of what they mean relative to the project. For instance, "High Impact" could be defined as, "Occurrence of this risk will cause major disruption of the project schedule, qualty, or budget and response sction should be taken immediately to eliminate or reduce the level of disruption".  It is a good idea to describe the Probability categories as a projected likelihood of occurrence--e.g., "High Probability" means that there is an approximately 85% likelihood or greater of occurrence.
• Risk analysis (one selected risk for each person on the team). This is a detailed evaluation of each selected risk that should include: a) description of the risk, b) triggers/indicators, and c) description of appropriate risk response strategies--making reference to the PMI's response strategy types (Acceptance, Avoidance, Mitigation, Transference).

*The risk name should be descriptive with enough words that a reader can understand the basic nature of the risk without the need the look at a more detailed explanation.  Make sure to avoid the trap of defining a risk as the result of the risk. Focus on the actual condition or event that impacts the project. For example, "delay in field data collection" is not a risk--this is the potential result of one or more risk events.

Important Notes:

Remember that this assignment relates to the project as a whole--not just specific deliverables as in Assignment #6 .  So step back and consider risk events, conditions, and circumstances that could impact any aspect of the project and understand that a single risk could impact work on one or more deliverables.

You may have discovered that the Project Management Institute (PMI) identifies both “negative” and “positive” risk. To simplify your work on this Assignment, deal only with negative risk—those potential risks that could have a negative impact on the project schedule, cost, quality, etc.

The team leader will have the main responsibility for assembling contributions from team members into a final deliverable and submit the assignment for the team.

The risk probability/impact matrix and the risk analysis write-ups on selected risks should be about 1500 to 2500 words in length. As is the case for all written assignments, the word count is a target to give you an idea about the level of detail expected. As a general rule, it is best to keep it concise and as brief as possible while still covering the necessary topics. No points will be deducted for submittals if they exceed the maximum word count by a small amount.

Refer to the grading rubric below for guidelines about the expected format and content of this Assignment.

As in all written assignments, you should include a cover page which includes the following information: a) course number and name, b) assignment number and name, c) your name, d) submittal date. The cover page should also have the full project name and document title ("Risk Management Plan"). Your submitted assignment should be formatted as specified in the Format Quality of this assignment’s rubric below to earn maximum points. As you prepare this assignment, START WITH AN OUTLINE, with sections and subsections that cover the topics above. We recommend that you use the Outline/Heading feature of your word processing software in document preparation. It is expected that you will organize the document into numbered and named sections. It is best practice today, for technical and management documents to use a "decimal" outline numbering scheme (1., 1.1, etc.) as opposed to the older Roman Numeral numbering approach.

Submitting the Assignment

View specific directions for submitting Assignment 6 and Assignment 7. As in all assignments, your document should include a title, identification of the Assignment # and name, your name, and date.

The following are due at the end of Lesson 8:

• Quality Plan (Assignment 6) - assigned in Lesson 7
• Risk Management Plan (Assignment 7) - assigned in Lesson 8

This Assignment 7 is worth 70 points. The points awarded from the Instructor’s grading of this Assignment will be given to all members of the team.

The instructor may deduct points if the Assignment is turned in late, unless a late submittal has been approved by the Instructor prior to the Assignment submittal date.

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Risk Management and Risk Analysis

Assessing and managing risks.

By the Mind Tools Content Team

Risk is made up of two parts: the probability of something going wrong, and the negative consequences if it does.

Risk can be hard to spot, however, let alone to prepare for and manage. And, if you're hit by a consequence that you hadn't planned for, costs, time, and reputations could be on the line. Similarly, overestimating or overreacting to risks can create panic, and do more harm than good.

This makes Risk Analysis an essential tool. It can help you to identify and understand the risks that you could face in your role. In turn, this helps you to manage these risks, and minimize their impact on your plans.

By approaching risk in a logical manner you can identify what you can and cannot control , and tackle potential problems with measured and appropriate action. This can then help to alleviate feelings of stress and anxiety, both in and outside of work.

In this article and video, we look at how you can identify and estimate risks. You will then learn how a strategy of avoiding, sharing, accepting, and controlling can help you to manage risk effectively.

What Is Risk Analysis?

Risk Analysis is a process that helps you to identify and manage potential problems that could undermine key business initiatives or projects. However, it can also be applied to other projects outside of business, such as organizing events or even buying a home!

To carry out a Risk Analysis, you must first identify the possible threats that you face, then estimate their likely impacts if they were to happen, and finally estimate the likelihood that these threats will materialize.

Risk Analysis can be complex, as you'll need to draw on detailed information such as project plans, financial data, security protocols, marketing forecasts, and other relevant information. However, it's an essential planning tool, and one that could save time, money, and reputations.

When to Use Risk Analysis

Risk analysis is useful in many situations:

• When you're planning projects, to help you to anticipate and neutralize possible problems.
• When you're deciding whether or not to move forward with a project.
• When you're improving safety and managing potential risks in the workplace.
• When you're preparing for events such as equipment or technology failure, theft, staff sickness, or natural disasters.
• When you're planning for changes in your environment, such as new competitors coming into the market, or changes to government policy.

How to Use Risk Analysis

To carry out a risk analysis, follow these steps:

1. Identify Threats

The first step in Risk Analysis is to identify the existing and possible threats that you might face. These can come from many different sources. For instance, they could be:

• Human – Illness, death, injury, or other loss of a key individual.
• Operational – Disruption to supplies and operations, loss of access to essential assets, or failures in distribution.
• Reputational – Loss of customer or employee confidence, or damage to market reputation.
• Procedural – Failures of accountability, internal systems, or controls, or from fraud.
• Project – Going over budget, taking too long on key tasks, or experiencing issues with product or service quality.
• Financial – Business failure, stock market fluctuations, interest rate changes, or non-availability of funding.
• Technical – Advances in technology, or from technical failure.
• Natural – Weather, natural disasters, or disease.
• Political – Changes in tax, public opinion, government policy, or foreign influence.
• Structural – Dangerous chemicals, poor lighting, falling boxes, or any situation where staff, products, or technology can be harmed.

Note: It is vital that you consider any and all risks to your team members. Managers and leaders have a duty of care , and so will have legal and moral obligations to keep their employees safe.

You can use a number of different approaches to carry out a thorough analysis:

• Run through a list such as the one above to see if any of these threats are relevant.
• Think about the systems, processes, or structures that you use, and analyze risks to any part of these. What vulnerabilities can you spot within them?
• Ask others who might have different perspectives. If you're leading a team, ask for input from your people, and consult others in your organization, or those who have run similar projects.

Tools such as SWOT Analysis , Failure Mode and Effects Analysis , PMESII-PT , and PEST Analysis can also help you uncover threats, while Scenario Analysis helps you to explore possible future threats.

Tip: Be mindful not to confuse Risk Analysis with Risk Assessment. The latter is the process of formally analyzing and mitigating the risks and hazards of an activity by an employee for their health and safety.

2. Estimate Risk

Once you've identified the threats you're facing, you need to calculate both the likelihood of these threats being realized, and their possible impact.

One way of doing this is to make your best estimate of the probability of the event occurring, and then to multiply this by the amount it will cost you to set things right if it happens. This gives you a value for the risk:

Risk Value = Probability of Event x Cost of Event

As a simple example, imagine that you've identified a risk that your rent may increase substantially.

You think that there's an 80 percent chance of this happening within the next year, because your landlord has recently increased rents for other businesses. If this happens, it will cost your business an extra $500,000 over the next year.

So the risk value of the rent increase is:

0.80 (Probability of Event) x $500,000 (Cost of Event) = $400,000 (Risk Value)

You can also use a Risk Impact/Probability Chart to assess risk. This will help you to identify which risks you need to focus on.

Tip: Don't rush this step. Gather as much information as you can so that you can accurately estimate the probability of an event occurring, and the associated costs. Use past data as a guide if you don't have an accurate means of forecasting.

How to Manage Risk

Once you've identified the value of the risks you face, you can start to look at ways of managing them.

Tip: Look for cost-effective approaches – it's rarely sensible to spend more on eliminating a risk than the cost of the event if it occurs. It may be better to accept the risk than it is to use excessive resources to eliminate it.

Be sensible in how you apply this, though, especially if ethics or personal safety are in question.

Avoid the Risk

In some cases, you may want to avoid the risk altogether. This could mean not getting involved in a business venture, passing on a project, or skipping a high-risk activity. This is a good option when taking the risk involves no advantage to your organization, or when the cost of addressing the effects is not worthwhile.

Remember that when you avoid a potential risk entirely, you might miss out on an opportunity. Conduct a "What If?" Analysis to explore your options when making your decision.

Share the Risk

You could also opt to share the risk – and the potential gain – with other people, teams, organizations, or third parties.

For instance, you share risk when you insure your office building and your inventory with a third-party insurance company, or when you partner with another organization in a joint product development initiative.

Accept the Risk

Your last option is to accept the risk. This option is usually best when there's nothing you can do to prevent or mitigate a risk, when the potential loss is less than the cost of insuring against the risk, or when the potential gain is worth accepting the risk.

For example, you might accept the risk of a project launching late if the potential sales will still cover your costs.

Before you decide to accept a risk, conduct an Impact Analysis to see the full consequences of the risk. You may not be able to do anything about the risk itself, but you can likely come up with a contingency plan to cope with its consequences.

However, it's important to bear in mind that everyone's definition of "acceptable risk" is different, so be sure to communicate with others before you make a decision, and use tools like the Prospect Theory to predict people's different reactions to risk.

Control the Risk

If you choose to accept the risk, there are a number of ways in which you can reduce its impact.

Business Experiments are an effective way to reduce risk. They involve rolling out the high-risk activity but on a small scale, and in a controlled way. You can use experiments to observe where problems occur, and to find ways to introduce preventative and detective actions before you introduce the activity on a larger scale.

• Preventative action involves aiming to prevent a high-risk situation from happening. It includes health and safety training, firewall protection on corporate servers, and cross-training your team.
• Detective action involves identifying the points in a process where something could go wrong, and then putting steps in place to fix the problems promptly if they occur. Detective actions include double-checking finance reports, conducting safety testing before a product is released, or installing sensors to detect product defects.

Plan-Do-Check-Act is a similar method of controlling the impact of a risky situation. Like a business experiment, it involves testing possible ways to reduce a risk. The tool's four phases guide you through an analysis of the situation, creating and testing a solution, checking how well this worked, and implementing the solution.

Alternatively, James Reason's Swiss Cheese Model of System Accidents explores how there is no single solution to minimizing risk, but rather uses a combination of methods to get the best results.

Risk Analysis is a proven way of identifying and assessing factors that could negatively affect the success of a business or project. It allows you to examine the risks that you or your organization face, and helps you decide whether or not to move forward with a decision.

You perform a Risk Analysis by identifying threats, and estimating the likelihood of those threats being realized.

Once you've worked out the value of the risks you face, you can start looking at ways to manage them effectively. This may include choosing to avoid the risk, sharing it, or accepting it while reducing its impact. Not only can this help you to make sensible decisions but it can also alleviate feelings of stress and anxiety.

It's essential that you're thorough when you're working through your Risk Analysis, and that you're aware of all of the possible impacts of the risks revealed. This includes being mindful of costs, ethics, and people's safety.

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Hi, there is no option to download the tools 'print this free worksheet, and then follow these steps'. Can you please advise me how to download this free risk assessment template?

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Risk Management Assignment

Determine the objectives of the organisation:, introduction.

• This task is involve all the point of risk management process. Identify the risks and potential effects in general, can help the local computer in starting the process of risk management or contract, auditors should recommend that agencies explore better ways of management in the region. Reducing the risk "acceptable" level of risk can not be eliminated. It includes the level of risk the organization can live, make sure that the right controls in place to keep the risk to an acceptable level. Transfer of risk to the insurer. i.e. to ensure the company's property theft or damage, such as wind or fire damage or transferring the risk to another organization (for example, using a third install network equipment vendor that sales are made responsible for plant success or failure).
• Examine and discuss each step below which forms part of the risk management process followed within an enterprise. Explain the reasons behind each step, what each step achieves for the enterprise and give examples.
• Risk management and risk management purposes, the first step toward defining the goals of your organization to define a shared vision. A general view of the back, you have to define the objectives of the overall risk management purposes.
• In a statement, while the aspirational vision, goals and objectives as stated in simple terms what needs to be achieved in general. They should be in a real system. They are defined in the company's business strategy.
• For example, some common goals, risk management companies choose to design their ERM approach as follows:
• In order to manage the cost of risk-based business, multiple functions and business units to develop a general understanding of risk.
• Get a better understanding of the risks of competition.
• Creating a protection against financial surprises.
• Create and effectively limited possibilities, vital, improve opportunities to deal with disaster risk.
• Achieve lower costs through better management of local resources.
• Allocate capital more efficiently.
• Be consistent with the risk management objectives and strategies to support the business objectives and the company. Therefore, the company's business model and risk management provides an important context.
• identify exposures to loss:
• Identification of risk management is an important first step; If you know that it is quite possible loss of coverage as a truly strategic, cost-effective to deal with them will not be able to develop.
• Hundreds can not risk or hazard that may lead to an unexpected loss will be recognized. For example, if you had a fire, how can you fire losses do not realize that large. This includes building demolition and clear, but at the same time you should consider. Smoke and water damage.
• Destruction of personal property and the property of others experts to vacate the premises (for example, data processing equipment or property leasing customers for inspection or repair, you'll leave).
• How much work is lost for the time it takes to return to normal business.
• The possibility of permanent loss of customers of competitors.
• In every detail of your business activities, risk identification process begins to look and what might cause a loss. exposure you can get some answers.
• You know, for each side, ask how big a loss. This focuses on the ability of weight on each side, for example, harm does it cost? The goal here replaced or repaired, but the total cost of losses is to find the source of funds.
• Many business owners as a list of insurance agents is available risk analysis survey or research use. In addition, agents can help you analyse your situation; expertise and experience, are less likely to forget any subject.
• Measure those same exposures:
• The risk of the effects of such a process. Events are exposed to so eliminate the possibility of not. However, information management and try to understand the risks and more effective crisis management in accordance with Council report:
• "The objectives of the companies and organizations in and a result, development and protection of the environment in which the risk is transferred from the surface., There is no comprehensive evaluation of the sound system is regularly cited as evidence of the involvement of the company at risk. Nature and some success in the costs of the company to take risks, objective, fairness and risk management and to help him right "
• The first crisis management, investing a little time and effort, and avoid many of the problems in the management can achieve great benefits. What action (dangerous) to initiate and to treat the symptoms (effect) is good medicine.
• Select alternatives:
• Risk management offers a number of different ways to different risk circumvention. Liberty International Underwriters Gaza rumours are:
• Customizing the frontman for all lines of insurance
• High quality claims handling
• Vaccines and under the most
• Assessment / risk insurance
• global status
• Mortality risk and reinsurance programs
• Implement a solution:
• Improve the quality and effectiveness of risk management
• Risk assessment in collaboration with business users
• Automate and consolidate corporate communication of risk exposure
• Risk Management Department is responsible for assessing your organization's exposure to risk, ensuring that the risk is adequately controlled by all departments and verified that all business units are using the same method of risk assessment.
• Mega solution for enterprise risk management has been developed to support risk management and risk owners throughout the process of risk assessment and control, with a personalized interface for each user profile.
• Common workspace, workflows, and shared resources to help stakeholders to exchange information and knowledge, the use of existing standards, methods and documentation, and ensuring full of data.
• Graphical modelling capabilities the solution provides better readability risk mapping. Risks are mapped directly to the diagrams of business processes within the organization that can be adapted to the risk exposure. Facilitated cooperation with business processes helps managers to strengthen the culture on the basis of risk across the organization.
• Monitor and review the outcomes:
• Monitoring is an important aspect of continuous improvement. In order to constantly monitor and support is the overall activity of the tissue, in order to ensure the value the effectiveness, efficiency and, regular review of risk management policies and procedures necessary. They also, within government agencies, and to provide feedback both of the entire government, stakeholders and other administrators. Approach and risk management system and inspection, will help you determine whether or not to achieve the desired results, collected during an audit, potential gaps for improvement, views, suggestions and opinions, and opportunities gap it helps to identify.
• If necessary, monitoring and evaluation, methods and organization of risk management, communication request, the process of reporting of stakeholders internal and external and I will connect the members of the door.

Examine and discuss a risk management frameworks standards model. Discuss the principles behind the model, the drivers and components involved in the process.

• A risk management framework is a description of a specific set of organizational and functional Activities and related definitions which define the risk management system in an organization. Organizational system and the relationship to risk management. Risk management Framework defines the processes and procedures and timing of processes that will be used to Risk management. Good risk management framework should enhance and improve risk.
• Management by:

1 making it more transparent and understandable to stakeholders, 2 by making their processes more efficient and 3 by allowing for cross fertilization of risk controls, risk estimation, risk assessment of Others because standardize terminology, processes, equipment, etc.

• components of Risk management Frameworks

Risk management consists of eight items related companies. it comes About the way management runs a business and will be integrated with the management process.

The elements are:

• Internal Environment - The internal environment includes tons Organization and establishes the basis for how we see the risk assumed by People, including risk management philosophy and risk appetite, integrity and ethical Values ¹and the environment in which they operate.
• Set targets - targets must exist before management can identify potential Events affecting the results. Enterprise risk management ensures that management has established a process to set objectives and that the chosen objectives Support and fits with the mission of the unit and is consistent with its risk appetite.
• Event Identification - Internal entity affecting achievement and external events The objectives must be identified, distinguishing between risks and opportunities. Opportunities will come back to the control strategy and goal setting Processes.
• Risk Assessment - Risks are analyzed, considering likelihood and impact, as a basis To determine how they should be managed. Risk will be assessed indigenous Residual base.
• Risk Response - The Board selects risk responses - avoiding, accepting, reducing, Or sharing risk - developing a set of actions to align risks with the entity's risk Tolerances and risk appetite.
• Control Activities - Policies and procedures implemented to help To make sure that the risks are being effectively implemented.
• Information and Communication - relevant information is captured and Press the manner and the conditions that enable people to achieve their Obligations. Effective communication also occurs in a broader sense, flowing To the other side, or even people.
• Monitoring - Global enterprise risk management is monitored and Changes made in case of Poland. Monitoring is carried out under management activities, separate evaluations, or both. Risk management in the company is not entirely a serial process, in which only one component affects further. It is a multi-iterative process, where almost all the components can not interact.

Examine and discuss each step below which forms part of the risk assessment process followed within an enterprise. Explain the reasons behind each step, what each step achieves for the enterprise and give examples

• Identification of relevant business objectives:
• It is possible to account for the risk assessment and vulnerability to a number of objectives. Some of these objectives may be the result of matching the requirements of the new rules, orders and regulations related to information security. Safety as a process for IT infrastructure and assets relating primarily to prevent, detect and comprehensive process safety and security architecture and a powerful framework to help IT organizations to ensure the safety of infrastructure and property in accordance with the minimum level of acceptable risk or exposure.
• Identifying events that could affect the achievement of objectives:
• Measuring the success of your event in many ways, one of which is security. As part of any good plan. The process should identify hazards and assess risks and controls to minimize the risk of injury or Damage. Events in size, nature and character is different, but all events require assessment, monitoring and risk control. While most of us understand this, we find it difficult to document the event, such as risk Register or application of risk control. Start with something simple to remember and build on it. It will be Valuable tool that you can use to assess the security event - from the planning stage through to the overall. Evaluation of the event.
• Determining risk tolerance:
• Your Risk tolerance measures how comfortably you can handle declines in the value of your investment both emotionally and financially. Build a retirement portfolio tailored to your risk tolerance is crucial. In addition to providing peace of mind, it enables you to avoid making rash decisions when emotions investment market volatility. Investors who do not risk more than they can genuinely bear often end up leaving their investments at the worst possible time, Incurring losses that could have otherwise been avoided by investing in risk their comfort zone. your risk tolerance is determined by several factors, some of that combine and your ability to take risks and others that relate to your attitude to risk-taking. Your ability to take risk may depend on your age when you expect to retire, how much properties are already saved up, and your current strength and future access. Your attitude to risk depends largely on your personality and investment experience.
• Assessing the inherent likelihood and impact of risks:
• For internal Auditor, Risk analysis is important because it provides information on the priorities in the audit universe. Auditor looking at all he has the right to audit (audit universe) and wondered where his career, giving the point, is better executed. You need to think this through: not in areas where management knows they have issues. If she inspections there, he'll find ways to respond to management resounding "So what, we knew that already" added value insurance directly. That the auditor should consider are the areas where the risk is great, but according to the management appropriately mitigated. Chemical residues reviews do him no good, because the colour management will be sufficiently mitigated the risk as the residual risk. It gets confused and states the primary risk or low risk normal residual value. Thus, the internal Auditor wants to review natural hazards.
• Evaluating the portfolio of risks and determining risk responses:
• By taking a portfolio approach to risk management, companies can optimize, rather than reduce, natural hazards. However, as the inherent risk of failure to align with the business of risk appetite, risk responses should be applied. Response options include accepting the risk, in order to avoid risks and reduce risk. Reduce the cost of operations should be considered along with the benefits to fully determine the actual benefit of all responses. Estimated net profit is important to determine what is the most appropriate response (s) risk. One such activity is the reduction of business process management (BPM), which is also important for effective enterprise risk management (ERM). By linking performance specification for the process to strategic objectives, BPM can be a useful tool to efficiently manage risk from a portfolio perspective tool.
• Assessing residual likelihood and impact of risks:
• Risks commonly accepted definition is: information security threats usually are divided into three categories of natural, plant or human "Possibility that the threat (or threat agent) to exploit vulnerability is due multiplied by the impact of business they use. "and the effects will be assessed on the confidentiality, integrity and availability of information assets. The organizations have been carrying out this procedure successfully to assess the risk for many years. What organizations are struggling with is that when you do this type of assessment and how to use the results to make decisions to implement the time, money and resources to reduce the risk. In terms of information assets, risk assessment methods.

We learn here how risk management process is important. Risk assessment and frameworks standard are very effective in risk management process. Risk management is relevant to everything you do, not just the advice you give the client but yourself and the way you run your office. Risk assessment consider the risk quality and quantity.

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1. Avoidance

2. retention, 4. transferring, 5. loss prevention and reduction, the bottom line.

• Health Insurance

5 Basic Methods for Risk Management

Diane Costagliola is a researcher, librarian, instructor, and writer who has published articles on personal finance, home buying, and foreclosure.

As people begin to age, they usually encounter more health risks. Managing pure risk entails the process of identifying, evaluating, and subjugating these risks. It's a defensive strategy to prepare for the unexpected.

The basic methods for risk management—avoidance, retention, sharing, transferring, and loss prevention and reduction—can apply to all facets of an individual's life and can pay off in the long run. Here's a look at these five methods and how they can apply to the management of health risks.  

Key Takeaways

• Avoidance means not participating in activities that could harm you; in the case of health, quitting smoking is a good example.
• Retention acknowledges the inevitability of certain risks, and in terms of health care, it could mean picking a less expensive health insurance plan that has a higher deductible rate.
• Sharing risk can be applied to how employer-based benefits are often more affordable than if an individual gets their own health insurance.
• Transferring risk relates to healthcare in that the cost of the care is transferred to the insurer from the individual, beyond the cost of premiums and a deductible.
• Loss prevention and reduction are used to minimize risk, not eliminate it—the same concept is used in healthcare with preventative care.

Investopedia / Eliana Rodgers

Avoidance is a method for mitigating risk by not participating in activities that may incur injury, sickness, or death. Smoking cigarettes is an example of one such activity because avoiding it may lessen both health and financial risks. 

According to the American Lung Association, smoking is the leading cause of preventable death in the U.S. and claims more than 480,000 lives per year. Additionally, the U.S. Centers for Disease Control and Prevention notes that smoking is the No. 1 risk factor for getting lung cancer, and the risk only increases the longer that people smoke.

Life insurance companies mitigate this risk on their end by raising premiums for smokers versus nonsmokers. Under the Affordable Health Care Act , also known as Obamacare, health insurers are able to increase premiums based on age, geography, family size, and smoking status. The law allows for up to a 50% surcharge on premiums for smokers.

Risk management strategies used in the financial world can also be applied to managing one's own health.

Retention is the acknowledgment and acceptance of a risk as a given. Usually, this accepted risk is a cost to help offset larger risks down the road, such as opting to select a lower premium health insurance plan that carries a higher deductible rate. The initial risk is the cost of having to pay more out-of-pocket medical expenses if health issues arise. If the issue becomes more serious or life-threatening, then health insurance benefits are available to cover most of the costs beyond the deductible. If the individual has no serious health issues warranting any additional medical expenses for the year, then they avoid the out-of-pocket payments, mitigating the larger risk altogether.

Sharing risk is often implemented through employer-based benefits that allow the company to pay a portion of insurance premiums with the employee. In essence, this shares the risk with the company and all employees participating in the insurance benefits. The understanding is that with more participants sharing the risks, the costs of premiums should shrink proportionately. Individuals may find it in their best interest to participate in sharing the risk by choosing employer health care and life insurance plans when possible.

The use of health insurance is an example of transferring risk because the financial risks associated with health care are transferred from the individual to the insurer. Insurance companies assume the financial risk in exchange for a fee known as a premium and a documented contract between the insurer and individual. The contract states all the stipulations and conditions that must be met and maintained for the insurer to take on the financial responsibility of covering the risk.

By accepting the terms and conditions and paying the premiums, an individual has managed to transfer most, if not all, the risk to the insurer. The insurer carefully applies many statistics and algorithms to accurately determine the proper premium payments commensurate to the requested coverage. When claims are made, the insurer confirms whether the conditions are met to provide the contractual payout for the risk outcome.

This method of risk management attempts to minimize the loss, rather than completely eliminate it. While accepting the risk, it stays focused on keeping the loss contained and preventing it from spreading. An example of this in health insurance is preventative care.

Health insurers encourage preventative care visits, often free of co-pays, where members can receive annual checkups and physical examinations. Insurers understand that spotting potential health issues early on and administering preventative care can help minimize medical costs in the long run. Many health plans also provide discounts to gyms and health clubs as another means of prevention and reduction in order to keep members active and healthy.

What Is Risk Management?

Risk management is the process of identifying and mitigating risk. In health insurance, risk management can improve outcomes, decrease costs, and protect patient safety.

Why Is Risk Management Important in Healthcare?

When dealing with healthcare, risk management benefits both patient and insurer. Patients benefit by avoiding dangerous habits, transferring the risk to the insurer, and preventing future health problems through preventative care. Insurers benefit because people who avoid risk and take care of their health are healthier, less costly patients.

What Are Some Strategies for Managing Risk?

Five common strategies for managing risk are avoidance, retention, transferring, sharing, and loss reduction. Each technique aims to address and reduce risk while understanding that risk is impossible to eliminate completely.

Managing risk from a health perspective can pay off over time, thanks to lower premiums, fewer out-of-pocket expenses, and greater health in the long term. Health insurance companies benefit from risk management strategies as well, allowing them to preserve their profits and improve their bottom line.

American Lung Association. " Health Effects ."

Centers for Disease Control and Prevention. " What Are the Risk Factors for Lung Cancer? "

U.S. Department of Health. " How Insurance Companies Set Health Premiums ."

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The CLS Blue Sky Blog

Columbia Law School's Blog on Corporations and the Capital Markets

Debevoise discusses proposed fdic guidelines for corporate governance and risk management.

On October 11, 2023, the Federal Deposit Insurance Corporation (the “FDIC”) published in the Federal Register for comment a notice of proposed rulemaking to establish new guidelines (the “Proposed Guidelines”) for governance and risk management at FDIC-supervised insured depository institutions with $10 billion or more in consolidated assets (“covered institutions”). [1] The Proposed Guidelines would be issued as Appendix C to the FDIC’s standards for safety and soundness regulations in part 364 and would be enforceable under Section 39 of the Federal Deposit Insurance Act (the “FDI Act”).

The Proposed Guidelines aim to improve the safety and soundness of covered institutions through governance and risk management following the bank failures this past spring. The preamble, referring to the post-mortem evaluations of the Signature Bank and Silicon Valley Bank (“SVB”) failures conducted by the FDIC and the Federal Reserve Board (the “FRB”), notes that poor governance and risk management practices were contributing factors leading to the failure of those banks. [2]

The Proposed Guidelines are generally consistent with and draw from both the Office of the Comptroller of the Currency (the “OCC”)’s Guidelines Establishing Heightened Standards for Certain Large Insured National Banks, Insured Federal Savings Associations, and Insured Federal Branches (the “Heightened Expectations”) [3] and the FRB’s Regulation YY (the “Enhanced Prudential Standards”) and are intended to help harmonize interagency guidance. The Proposed Guidelines also would codify prior FDIC guidance and supervisory expectations, including regarding the role of the board of directors. As we note below, certain expectations set out in the Proposed Guidelines would exceed the Heightened Expectations in prescriptiveness and stringency, while others appear new. Notably, the Heightened Expectations apply to institutions with at least $50 billion in consolidated assets, and the risk management requirements of the Enhanced Prudential Standards apply to bank holding companies with consolidated assets exceeding $100 billion and foreign banking organizations with combined U.S. assets of $100 billion or more.

The Proposed Guidelines were released over the dissent of FDIC Vice Chairman Travis Hill and Director Jonathan McKernan. In his dissenting statement , Director McKernan opined that some of the Proposed Guidelines may “conflate the roles of board and management, preempt state corporate law, and potentially conflict with regulatory expectations applicable to parent companies.”

Comments on the Proposed Guidelines are due by December 10, 2023.

KEY TAKEAWAYS

Below we discuss some key takeaways from the proposal. The summaries included in these takeaways are not intended to be exhaustive.

Content of Proposed Guidelines

The Proposed Guidelines would set standards for corporate governance, risk management practices and board oversight. As discussed further below, there are some specific instances where a covered institution may borrow from its parent company’s risk management program or board to meet these standards.

A.   Board of Directors

• Composition . The Proposed Guidelines set out minimum standards for board composition, requiring a majority of its members to be independent and outside directors (consistent with the FDIC’s guidance for applications for deposit insurance). [4] In terms of director independence between a covered institution and its parent company, where the business of a covered institution’s parent is consolidated predominantly in the covered institution, an independent director of the parent may also be an independent director of the covered institution, provided that the director is not a principal, member, director, officer or employee of any other institution or affiliates of the parent. The Proposed Guidelines also emphasize the importance of diversity and caution against excessive influence from a “dominant policymaker.” [5]
• Committees . The Proposed Guidelines also require boards to maintain a risk committee and compensation committee in addition to the audit committee required by Section 36 of the FDI Act and part 363 of the FDIC’s regulations. Risk committees would need to meet at least quarterly and maintain records of its proceedings, including risk management decisions. The Proposed Guidelines are unclear on the issue of whether the would-be requirement of an audit committee can be satisfied by the audit committee of a covered institution’s bank holding company (as is permitted under certain circumstances by part 363).
• Compensation Oversight . The Proposed Guidelines reflect the FDIC’s focus on board oversight of compensation programs, including through the requirement that a covered institution establish a dedicated, standalone compensation committee, and by requiring that the board adopt and oversee a Compensation and Performance Management Program.
• Policies and Board Approvals . The Proposed Guidelines envision a covered institution’s board taking an active role in establishing key components of the risk management program in addition to overseeing management. The board would approve a covered institution’s strategic plan and Code of Ethics, among other policies. While the FDIC’s Pocket Guide for Directors indicates that the board should ensure a bank has certain policies (including a Code of Ethics), it does not explicitly require approval of such policies by the board. [6] The Proposed Guidelines also require at least an annual review by the board of these policies. Additionally, the board would have to review and approve a covered institution’s risk appetite statement at least quarterly (or more frequently, as necessary, depending on the size and volatility of risks and any material changes in the covered institution’s business model, strategy, risk profile or market conditions). Notably, the Heightened Expectations require review of the risk appetite statement at least annually and only by the board’s risk committee.

B.   Risk Management Program

1. Three Lines of Defense Model . The Proposed Guidelines would require covered institutions to adopt a three-lines-of-defense risk management framework with a front line unit (which is exclusive of a covered institution’s legal department), an independent risk management unit led by a Chief Risk Officer and an internal audit unit led by a Chief Audit Officer.

a. Director McKernan’s dissenting statement notes that “one interpretation [of the Proposed Guidelines providing only one Chief Risk Officer] is that the FDIC expects that all second-line risk management responsibilities, including with respect to compliance-risk management, would be overseen by the Chief Risk Officer and the Risk Committee.” [7] The Proposed Guidelines, if interpreted this way, “would preclude a separate compliance-risk function.” [8]

b. The Proposed Guidelines differ again from the Heightened Expectations in that they would require more responsibility on the part of the independent risk management unit, requiring that the unit ensure that the front line meets risk management standards and establish compliance procedures and processes.

2. Use of Parent Company Structure . The Proposed Guidelines would permit a covered institution to use all or part of its parent company’s risk governance framework to satisfy the Proposed Guidelines in instances where the covered institution has a substantially similar risk profile to its parent company, provided that (i) parent company decisions do not jeopardize the safety and soundness of the covered institution and the covered institution’s risk profile is easily distinguishable; and (ii) separate from that of its parent for risk management and supervisory reporting purposes.

3. Types of Risk to be Addressed in Risk Management Program . The Proposed Guidelines provide that the following risks would need to be covered and addressed in a covered institution’s risk management program: operational (including, but not limited to, conduct, information technology, cybersecurity, AML/CFT compliance and the use of third parties to perform or provide services or materials for the covered institution), strategic, credit, concentration, interest rate, liquidity, price, model and legal risk.

4. Focus on Data Architecture and IT Infrastructure . A covered institution’s independent risk management unit would need to establish policies, procedures and processes that provide for the design, implementation and maintenance of a data architecture and IT infrastructure that supports the covered institution’s risk aggregation and reporting needs both during normal and stressed times. Further, material risks, concentrations, breaches of risk limits and emerging risks would need to be reported in a timely manner to the board and the CEO.

C.   Identifying and Reporting Violations of Law

• Internal Escalation . The Proposed Guidelines would require a covered institution’s board to establish processes by which personnel in front line and risk management units would identify, document and notify violations of law or regulation to the chief executive officer and the board’s audit and risk committees. The requirement for documenting and notifying violations of law and regulation in writing would be a new requirement not currently present in existing FDIC guidance (e.g., the FDIC’s Pocket Guide for Directors or the Heightened Expectations. Further, this requirement appears to directly address some of the observations made by the FDIC and FRB in their post-mortem reports regarding SVB.
• Reporting to Relevant Agency . The Proposed Guidelines would require the covered institution to timely report these violations to the agency with jurisdiction over those matters. This would represent a shift from the FDIC’s current practice of encouraging, but not requiring, self-reporting of violations.

D.   Enforceability

Section 39 of the FDI Act provides that, in the event of a covered institution’s failure to abide by standards prescribed by guidelines, the FDIC may, in its discretion, require the covered institution to submit a plan for the FDIC’s approval detailing steps it will take to comply with such standards. The Proposed Guidelines and the Heightened Expectations share Section 39 as their basis for enforceability.

E.   Questions

The FDIC asks multiple questions regarding the scoping of banks that should be subject to the Proposed Guidelines, including whether FDIC-supervised institutions with $10 billion or more in total consolidated assets is an appropriate threshold and whether other financial institutions should fall under the definition of a covered institutions. As mentioned above, comments are due by December 10, 2023.

[1]      Guidelines Establishing Standards for Corporate Governance and Risk Management for Covered Institutions with Total Consolidated Assets of $10 Billion or More , 88 Fed. Reg. 70391 (Oct. 11, 2023).

[2]      For more information on regulators’ post-mortem evaluations of the Signature Bank and SVB failures, please see our prior FinReg and FinTech Blog post, Key Takeaways from Bank Failure Reports (May 1, 2023), available here .

[3]      OCC Guidelines Establishing Heightened Standards for Certain Large Insured National Banks, Insured Federal Savings Associations, and Insured Federal Branches; Integration of Regulations , 79 Fed. Reg. 54518 (Sept. 11, 2014).

[4]      Applying for Deposit Insurance: A Handbook for Organizers of De Novo Institutions, Division of Risk Management Supervision (Dec. 2019), available here .

[5]      The Proposed Guidelines would codify in regulation a concept already present in the FDIC’s “RMS Manual of Examination Policies – Management” (the “ RMS Manual ”), stating that “a dominant policymaker may inhibit the directors’ exercise of independent judgment or prevent the board from fulfilling its responsibilities.” 88 Fed. Reg., supra note 1, at 70405. Under the RMS Manual, examiners are expected to consider the risks associated with a “dominant management official.”

[6]      Pocket Guide for Directors , FDIC (Dec. 13, 2007), available here .

[7]      Statement by Jonathan McKernan, Director, FDIC Board of Directors, on the Proposed Guidelines Establishing Standards for Corporate Governance and Risk Management , FDIC (Oct. 3, 2023), available here .

[8]        Id.

This post comes to us from Debevoise & Plimpton LLP. It is based on the firm’s memorandum, “Key Takeaways from the FDIC’s Proposed Guideline for Corporate Governance and Risk Management,” date October 19, 2023, and available here.  

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