What are differences between risk management plan (risk mitigation plan) and risk contingency plan?
Lots of business decisions are risky. Your products might go out of fashion, or a new product line might tank with your customers. Risk mitigation and contingency planning both help you prepare for trouble. Mitigation strategies are things you should be doing now, whereas your risk contingency plan only kicks in if disaster strikes. Show
Risk mitigation strategies are things you can do now to reduce your company's risk. A risk contingency plan is something you draw up now but don't deploy until the trouble comes to pass. Known and Unknown RisksThe first step in mitigating risk is understanding what you know and what you don't know.
Risk mitigation and contingency planning can effectively deal with known knowns and known unknowns. Unknown knowns and unknown unknowns are tougher and are sometimes impossible for which to plan. Identify the DangerThe first step to mitigating risk is to identify and evaluate it. The more risk you can class as known knowns, the better. It's also important to know whether there's anything you can do to mitigate or eliminate the danger.
About Mitigation PlanningOnce you've identified potential risks, you can assess them. Ideally, you can quantify how likely they are to happen and how bad the impact will be. Then, you can develop strategies for the most probable and most damaging risks to either improve the odds or mitigate the damage if they come to pass.
The difference between risk mitigation and contingency planning is that once you have a risk mitigation plan, you put it into action. A risk contingency plan sits in reserve until it's needed. The Risk Contingency PlanRisk contingency measures are the things your business will do if X happens. A risk mitigation plan might, for example, try to reduce the risk of your vendors hiking prices. A risk contingency plan spells out what to do if prices go up anyway. Risks for which you can prepare contingency plans include supply chain problems, fire, flood, data breaches and major network failure. Begin contingency planning by identifying your worst vulnerabilities. These are the things that would paralyze your organization if anything happened to them, such as your raw materials supply, key personnel or your IT network. Then, pinpoint the key risks to these areas. The Risk Contingency MatrixDrawing up contingency plans for everything that might go wrong is a herculean task. When you start out, it makes sense to focus on the omega-level threats first. One way to quantify the danger is with a risk contingency matrix. On one axis, you list the probability of a contingency coming to pass. If, say, your raw material prices are locked in by contract for the next three years, the risk of a price hike this year is nil. On the other axis, you list the damage factor: minor, moderate, major or critical. Once you've laid out the grid, you place each risk in a section of the matrix. Threats that are highly likely and would have critical impact are the ones that need contingency planning the most. Planning for ProblemsOnce you identify your top contingencies, start planning for them. Risk mitigation tries to reduce the chance of disaster happening. The risk contingency plan gets you up and running if catastrophe does come to pass. Suppose you're a government contractor, and you know there's a risk of a long government shutdown this year. To keep your business afloat, you may need both risk mitigation and contingency planning strategies:
Drafting Your PlansIt's possible that your business won't need risk contingency measures for every possible contingency. You may be able to group several contingencies together in an overall category, such as a drop in cash flow, a rise in prices or new competition entering the field. That will simplify your contingency planning. The initial plan for a given contingency should make clear what you'll do, but it doesn't have to go into detail. Your risk contingency measures for a government shutdown might include keeping your key employees working full time. You don't have to sit down and identify the employees until you see the contingency is shifting into the "going to happen soon" category. Remember to Stay PreparedOnce you've drafted a risk contingency plan, don't just file it away and forget about it until things go south. Let your employees and key stakeholders know that the plan exists. Share it with them and make it easy for them to access and study it. Whenever anything major changes at your company, pull out the plan and review it. If you've moved to a new building, changed suppliers or changed key personnel, that may change some of your contingencies or render them null and void. Regular review will keep the plan relevant to the contingencies of your current situation. What is the difference between risk mitigation and contingency planning?A mitigation plan attempts to decrease the chances of a risk occurring, or decrease the impact of the risk if it occurs. It is implemented in advance. A contingency plan explains the steps to take after the identified risk occurs, in order to reduce its impact. Think of a contingency plan as the last line of defense.
What is the difference between risk mitigation and risk management?Risk mitigation involves limiting the effect that risks can have: it's a single component of the larger risk management process. Risk management refers to the overall practice of assessing and addressing the risk your business faces.
What is risk and contingency plan?It is a detailed strategy for protecting your business against external risks and emergencies, such as natural disasters. Creating a contingency and risk assessment plan involves identifying the potential risk areas to create an effective response should those problems develop.
What is the relationship between mitigation plans and risk management?Risk assessment includes both the identification of potential risk and the evaluation of the potential impact of the risk. A risk mitigation plan is designed to eliminate or minimize the impact of the risk events—occurrences that have a negative impact on the project.
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