5 Risk Management Mistakes Your Company Should Avoid At All Costs
Risk management is one of the most important aspects when running any business. Many organizations understand this, but few have sound approaches to avoiding risks. The reluctance to develop a strong risk management plan stems from the constantly changing nature of new risks and ways to mitigate them.
There is no perfect plan to manage risk, but there are common risk management mistakes that you can avoid ensuring protection for your business.
1. Stopping at “Identifying Risks”
You must find risks to mitigate them, but this does not mean that the risk management process concludes as soon as you pinpoint all of them. By just discovering the risks your business faces, you have not actually done anything to try and stop them from happening. This is the essence of a great risk management plan. It is important that once you discover risks, steps are put in place to mitigate them.
2. Leaving IT Out of Risk Management
It is a mistake to completely leave your IT department out of your risk management strategy. While the technology team should not be left in charge of this operation, their insight can and should be used to find and mitigate a lot of risks. An increasing number of risks that businesses meet today involve data breaches and cybersecurity attacks. These departments have valuable information that can help other areas of your organization discover weaknesses.
3. Starting from Scratch
Instead of creating a risk management plan from scratch, look first at what is already in place for your industry. You will have to alter these plans to fit the unique needs of your organization, but by using these valuable insights you are harnessing expert advice and analysis that you would not have otherwise.
The Committee of Sponsoring Organizations of the Treadway Commission (COSO) and the American Institute of Certified Public Accounts (AICPA) both have industry standards for risk management frameworks that serve as a suitable place for an organization to start its risk mitigation.
When looking at existing plans and implementing your own, consider the variables that affect each risk. These are all difficult items to identify, especially if you have not experienced the risk situation before.
4. Setting Expectations too High
There is no way to predict every single risk an organization will face. If this is what you expect you will probably be left disappointed. A successful risk management plan finds known risks and ways to mitigate them. It is a mistake not to consider them as “living documents” that are constantly changing. So, when an unexpected risk occurs you need to add it to the plan.
Keep in mind that just because you face a risk that was not part of your plan, this does not mean your risk management was unsuccessful. Businesses should base their success on their ability to add new risks to the plan and how they react when mitigating already named risks.
5. Assuring Protection Manually
A major aspect of every risk management plan is assuring there is insurance coverage for protection if damage arises from a risk. Because every risk is unique, businesses need many policies in place for protection. This means they need to keep track of what policies they have and when they expire.
A lot of organizations do this manually with paper files, Excel spreadsheets, emails, and phone calls. This may lead to human error and lost documentation. To assure your business has the right insurance policies, you need an automated way to collect and watch them.
How Can I Assure Insurance Policies are Up to Date?
The best way to assure your business and the third parties you work with have the necessary insurance coverage is with a certificate of insurance (COI) tracking and management software. This technological solution allows you to easily upload proof of insurance where it is scanned and tracked for expiration dates.
To learn more about how our software tracks COIs and assures this aspect of your risk management plan is flawless, schedule a free product demo!