Are You Prepared When a Risk Event Happens?

You have certain goals that you want for your business and have a plan in place to achieve those goals, but things can and will go wrong along the way to meeting those objectives. For this reason, it is important to have a risk event management plan in place to manage these events.

What Is a Risk Event?

A risk event is something that happens that negatively impacts your ability to meet your business objectives.

Risk events can result from factors internal to your business model such as human errors, processing errors, and system failures. It can also result from external factors beyond your control such as changes in customer behavior, the economic, legal, or political environment. Regardless of the cause, you want to have a plan in place to contain, recover from, remediate, and learn from the event when a risk event happens.

Risk Event Management Plan Steps:

Contain the event to ensure that it does not get any worse
Try to recover as much as you can to lower the actual impact of the event
Consider whether the cause of the event can or should be addressed and establish a remediation plan to lower the risk of the event reoccurring if needed.
Remember to look beyond the event and consider whether a similar risk event could materialize and put a plan in place to manage that event as well.

The severity of the event’s impact will determine the need to complete these steps.

What About Near-Misses?

Near-miss events, which are risk events that did not result in a negative impact on your business due to good fortune, are just as important to acknowledge. While you can be relieved that the negative impact was avoided, do not let your good fortune go to waste – remediate and learn from these types of events as well!

What About Crisis Events?

For many, the recent pandemic was and still is a crisis event. Crisis events are events with negative impacts that are so severe that they jeopardize your business’ ability to keep its doors open. You probably already have a crisis management plan for such scenarios if you have a good risk management framework.

Know that time is of the essence for these types of events. Your top priorities are to contain and recover from the event in this situation.

Try to understand the full extent of the event’s impact:

How much do you stand to lose?
Are there any legal or regulatory implications?
What does this mean for your ability to interact with your customers and suppliers?
How will your employees be affected?

Identify what could trigger the negative impact further for each of your impact areas. Gather the right people in the room to determine how to stem the negative impacts, monitor the triggers, and act on them early.

Keep A Record of Your Risk Events

It can be useful to log these risk events in a register for future risk identification and trend analysis purposes. They are part of the puzzle to understanding how well you are doing at managing your risks. With that said, recognize that risk events are inevitable and can happen at any time. Risk events are a part of doing business! So, try not be alarmed when they do happen – but be sure to act on them timely and appropriately.