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How do I Create a Risk Management Plan?

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  • Written By: Florence J. Tipton
  • Edited By: John Allen
  • Last Modified Date: 31 October 2016
  • Copyright Protected:
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    Conjecture Corporation
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Creating a risk management plan typically requires identifying and analyzing how the probability of an event may obstruct you from attaining a goal. The risks that are identified normally lead to developing a strategy that will neutralize or minimize the impact of the events. A practical approach might also include assessing, addressing, and reducing the chances that an unexpected event may have to affect the goal. You may not be able to foresee every catastrophic event, but creating a risk management plan may offer a road map of security.

Whether or not your risk management plan is for personal or professional use, identifying an event probability is often considered an important first step in developing a risk management plan. The risks are identified by looking at the conditions which make a certain event likely to happen. To do this, you may have to look at probable outcomes from certain decisions or speculate on the likelihood that an event occurs.

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Once you have identified the risks associated with an event, the next step is generally to assess the impact the risk may have on your business or personal life. You can assess risks by looking at the cost and benefit of reducing the threats. If you determine that the cost of neutralizing the risk is worth the benefit gained, you may choose to proceed with implementing the necessary steps for dealing with the risks. Conversely, if the costs surpass the benefits, you may consider an alternative strategy to endure the consequences of the event.

In order to address the risk, the next step in creating a risk management plan typically involves developing a contingency plan for withstanding the impact. Typically at this point in the plan, you may want to outline appropriate measures to take based on the probability that an event may occur. This contingency plan might also focus on how the risk is reduced and how your company or personal goals are affected.

Once you have created a risk management plan, you may want to conduct further analysis of the strategies and contingencies. This exercise may help to ascertain the effectiveness of the strategies within the contingency plan and other areas. Another possible benefit to this is having a chance for recognizing an impending event and giving you an opportunity to put the related contingency plan in place. The risk management process is fluid as the chances for an unfortunate event not identified in your original risk management plan may transpire at any time.

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