The Importance of P&P to Your Risk Mitigation Strategy

The Importance of Policies and Procedures to Your Risk Mitigation Strategy

Written by Risk Management Team on June 17, 2019

In your overall risk management strategy, proper risk assessment and data tracking will lead you to the correct risk mitigation strategy. Regardless of the strategy you decide upon – risk acceptance, risk avoidance, risk reduction or risk transference – it is important that you implement that strategy in a durable and sustainable way. At this stage of risk management, policies and procedures play a substantial role in introducing and upholding your mitigation strategy.

Each of the four central risk mitigation strategies is designed to address risk in a different way. You likely use all of them already and use them in different combinations at the same time to reduce your risk to an acceptable level. The role that policies and procedures play here is in giving organizations a formal basis for moving from their current to their target state of lower risk.

Policies and procedures work in tandem. Policies are more high-level, outlining principles and requirements. They set operational boundaries for your organization to reduce the amount of risk you’re exposing yourself to, such as limits on financial responsibility. Procedures address the lower-level processes – the day-to-day activities. They outline the appropriate way these daily processes should be undertaken, dispelling confusion and reducing risk.

Depending on which risk mitigation strategy you choose to implement, policies and procedures can help during this process in several key ways.

Training Employees and Increasing Awareness of Risk

Once you’ve identified the risk and developed a method for managing it, creating official policies and procedures helps to introduce this strategy to your employees. More than that, it also outlines the methods they need to take to adhere to the strategy and gives their actions a directive. They will have clarity regarding why they must change their procedures and what the goal of adjusting SOP is: reducing risk.

For instance, if through assessment and evaluation, you have determined that building safety violations are putting your business at greater risk of noncompliance or potential injury, you can employ a strategy of risk reduction. By implementing policies and procedures that train employees on understanding the inherent risks and identifying hazards, you will be able to increase your ability to locate and address violations before they become a serious issue. Policies set a clear standard for safety in the workplace, and procedures outline a standard method for recognizing and reporting issues.

Policies and procedures can also be used to make employees aware of information regarding a strategy of risk transference. For instance, if employees are putting themselves and the organization at risk, it may be necessary to purchase some type of insurance. A policy can clearly outline the minimally required insurance that will successfully mitigate risk, and accompanying procedures can outline the proper method for obtaining coverage and keeping that information on file.

Regardless of how you plan to address your risk, policies and procedures are an important mechanism for making everyone aware and setting a standard for how the organization as a whole will deal with it.

Setting Operational Boundaries and Prohibiting Activities

Another invaluable way policies and procedures help is through their ability to set boundaries or restrictions. This is especially important to the success of a risk avoidance or reduction mitigation strategy.

Sometimes, the best course of action to ensure you aren’t at risk is to avoid situations where it exists altogether – a strategy of avoiding risk. To help enforce this strategy, policies are essential to setting definitive rules for your employees outlining what they can and can’t do. For example, if your organization would like to avoid the risk of a sexual harassment lawsuit, you may put policies in place that direct employees of how to avoid risky situationsb such as prohibitng employees from meeting with their direct supervisors outside of work hours.

Policies and procedures can also restrict or set limits on activities your employees conduct in order to reduce risk. If you are a shipping company, for instance, you may choose to restrict the amount of time or distance drivers can be on the road in a strategy to reduce the likelihood of an accident occurring due to exhaustion. By setting a clear policy, there will be no misunderstanding the operational boundaries you intend your employees to maintain in order to achieve a state of lower risk.

Improving Management Controls

Well-written policies and procedures can help management set performance standards that are clearly stated, measurable and attainable. This ability to put better controls in place and lay out a method for enforcing them is an important aspect of managing project or departmental risk and having a successful mitigation strategy.

Improving management controls can help achieve several objectives:

  • More assurance that projects will have the intended outcomes
  • Resources are used appropriately
  • Laws and regulations are adhered to
  • Relevant information is collected, maintained and reported on

The role that policies and procedures play in creating a more effective management landscape is in developing a network of processes that properly address risks that could affect the achievement of operational goals. For example, this could mean putting procedures in place that direct the gathering of information to reduce the risk that it is inaccurate or mismanaged. For resources, policies and procedures should outline what resources are considered valuable – such as data, people, systems or finances – and the appropriate processes for safeguarding and maintaining them. Policies and procedures should establish practical controls through the creation of SOPs, plans, systems or other methods that encourage employees at every tier of management to uphold organizational objectives.

Risk and Policy Management in One Suite of Products

Risk management and policy and procedure management are closely linked. Once you have done the work of assessing risk and specifying a risk mitigation strategy, policies and procedures are an effective way to assure that strategy is followed through. To make this entire process – from initial risk assessment all the way to training employees on new policies – as straightforward and sustainable as possible, ComplianceBridge has developed a suite of products designed to help your organization.

TotalCompliance Risk allows you to quickly build assessments that utilize a variety of question types including multiple choice, short answer, fill-in-the-blank, yes/no or risk rating. You can also weigh your questions for improved scoring and introduce conditional, follow-up questions. The system handles distribution and collection of assessment results. You can even monitor these results in real-time as they come in. To best leverage your experts, you can divide your assessments and assign different sections to specific individuals, groups or departments in your organization. Through in-depth reporting and analysis, you can gain very targeted data about potential risks.

ComplianceBridge’s flagship product, TotalCompliance, gives you a powerful system equipped with the tools to create and manage your policies and procedures with ease. With a central location to edit and review new policies, document creation and revision is easy. Once a new policy or procedure has been approved by organization stakeholders, automate dissemination of new materials to affected employees. To improve comprehension, new policies and procedures can be accompanied by quizzes that test their understanding of the content. Results for these quizzes can also be monitored in real-time. You can use this data to measure compliance and the success of your risk mitigation strategy.

Policies and procedures play a valuable role in managing risk. To learn how you can not only identify risks in your organization but take steps to address them, request a demo with complianceBridge today!

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