Most companies don’t have a clear picture of where they stand when it comes to risk. One persistent reason this may be the case is that measuring risk is a daunting experience for companies. The illusion of safety and compliance can be more reassuring than understanding the types of risk their company faces, but failing to understand your risk leaves you vulnerable to legal and regulatory ramifications down the road.
If there’s any part of identifying risk that is perhaps more daunting for companies, it’s the risk management process they must undergo to get to that point. Risk management software can make the process of identifying risk and developing a risk mitigation strategy go much smoother.
Risk management software allows companies to easily survey and identify risks associated with their business through regular assessments and provides tools to evaluate this data to determine an appropriate risk mitigation strategy. In broad terms, risk is anything that can negatively affect your business. Following a process of risk management can help your company identify these vulnerabilities and take steps to address them.
Undertaking the risk management process manually can easily overwhelm a company. Lacking any supporting technology or systems leads to a disorganized process that is very time-consuming and costly. Perhaps it may even end up costing more than any potential risks. With the help of a risk management software, companies will have a cost-effective tool to identify risks and develop a risk mitigation strategy by following these steps:
- Identifying potential risks
- Build assessments to identify risk
- Assessing risk
- Evaluating and identifying risks
- Determine how to address and manage your risk
Risk management software assists you each step of the way.
Step 1: Ask the Right Questions
In order to begin the process of identifying your risk, you must begin by simply asking a question. By giving it some thought, you’ll realize there are many things you don’t know the answer to regarding your business processes. Commonly, companies and organizations face uncertainty around regulations, legal requirements, compliance and business operations.
Some examples of the types of questions you can ask of your company could be: Are we at risk of losing money if a supplier is delayed? Are our employees complying with industry regulations? What happens if we lose a client? Is the company vulnerable to a lawsuit in a particular area?
Through this exercise of narrowing in on the right questions – the ones you don’t have immediate answers for – you’ll find the areas of potential risk.
Step 2: Build Your Assessment
Once you have determined the questions that need further evaluation, the next step is to ask other knowledgeable parties in your company. This is where you start immediately seeing the benefits of employing a risk management software to build your assessments.
Building an assessment can be as simple as a few yes or no questions, or it can become quite complex, asking for specific information and data. The assessment must accurately define an issue and structure the questions in such a way that they’ll be best communicated to employees.
By using a risk management software, those creating assessments have a lot of flexibility and customization tools at their disposal to easily create the best assessment.
- Beginning by building from scratch or from a template, creators can use a variety of question configurations such as multiple choice, fill-in-the-blank, yes/no, short answers, ratings and more.
- Questions can also be weighted for numerical analysis. This will help account for varying conditions and lead to better scoring.
- Creators can add conditional logic so that respondents only see the questions they need to answer, improving risk scoring by eliminating unnecessary incorrect answers.
Assessments can be built in as little as two minutes, and although the platform may empower you to create complex, highly detailed assessments, don’t be afraid to keep it simple. Straightforward methodologies that make things as clear and concise for respondents will yield accurate, helpful responses.
Step 3: Ask Your Employees
A risk management software handles distribution of assessments and automatically collates results for your company. Once your assessment is ready, you are able to target exactly who you need responses from. If only a specific department or job role needs to answer the assessment, you won’t need to send it to the whole company.
The better the response rate to your assessments, the more accurate results will be. By distributing through a risk management software, the platform will also handle notifications and reminders to ensure more employees give their responses.
Where this software dramatically speeds up the process the most is in data collection. Responses to assessments will be automatically collected and tracked in real-time for you to view from anywhere.
Step 4: Evaluate the Results
How you need to evaluate your results depends on how you configured your assessments. It can simply be a numerical analysis in which you determine how many respondents answered a question correctly. Evaluators may also need to review short answers for accuracy.
You can also set thresholds to more easily evaluate results. if less that 90% of respondents answered a question correctly, for example, a risk management software will point out the potential risk to you. These thresholds can be adjusted for your preference.
A risk management software will allow you to analyze results even as they’re still coming in, and you can look at how respondents answered specific questions for a refined analysis.
Step 5: Determine a Risk Mitigation Strategy
After you’ve evaluated the results, you should have a clear picture of risk in your company. With that information, you’ll be able to judge which strategy will help you mitigate risk moving forward.
Risk Avoidance: A company takes actions to avoid any exposure to risk. Choosing not to begin a new project or sign a contract can be examples of practicing risk avoidance. It can also mean changing business operations to avoid a particular situation. This is usually the most expensive of the risk mitigation strategies.
Risk Limitation (or Risk Reduction): A company takes some actions to limit exposure to risk, but doesn’t avoid it at all costs. This strategy is a nice middle ground between risk acceptance and risk avoidance, as you are only trying to reduce risk to acceptable levels. A good example of this strategy is having redundancies or backups built into a system. You accept that a computer may crash and you may lose files, but you avoid any damage this may cause by having files backed up on a drive. This is the most common risk mitigation strategy for companies to employ.
Risk Transference: A company hands their risk off to a willing third party. A third party accepts this transferred risk in exchange for business or monetary benefits, and a company can better focus on risks associated with their core functions. Typically, companies transfer risk through outsourcing processes such as customer service or payroll services to another entity or by purchasing insurance and transferring risk to the insurance provider.
Risk Acceptance (also Risk Retention): A company chooses not to try to reduce risk and accepts the effects of it. Although this is a strategy of non-action, it is a strategy nonetheless. It can be a common choice when the cost of using other risk mitigation strategies is higher than the cost of the risk itself, or when the risk is not very likely to happen. To choose this strategy, you must understand and be willing to accept the impacts of inaction.
No risk can be completely eliminated. When choosing a risk mitigation strategy, carefully consider the situation, the probability of risk affecting your company and the impacts it will have. At this stage, it may be necessary to carry out more assessments to come to a decision on the best strategy to use for your company. A risk management software will be able to assist with that, as well.
Manage Risk with TotalCompliance®
Streamline the risk management process with TotalCompliance by ComplianceBridge®. From building assessments to evaluating data, TotalCompliance Risk has the versatility and tools to manage each step and make your job easier. This software allows you to manage risk on as many as five or six different dimensions, and having the ability to weight questions and use conditional logic improves you measurement of risk.
If you choose to use a risk management software such as TotalCompliance Risk, you have even more distribution options that will generate the best possible results. Respondents, for instance, have the ability to delegate assessments. If a manager thinks people on her team would be better suited to answer the assessment, she will reassign questions, and these delegations will be automatically tracked. Assessments can also be broken up, allowing only specific individuals, groups or distribution lists to answer particular sections or questions in an assessment.
TotalCompliance Risk will allow your company to manage risk on a regular basis. It improves reporting and giving you more accurate data to aid in choosing an appropriate risk mitigation strategy. Learn more about our risk management software today by scheduling a demo!