Identifying an event probability is often considered an important first step in developing a risk management plan.
Creating a risk management plan typically requires identifying and analyzing how the likelihood of an event could prevent you from achieving a goal. The identified risks typically lead to the development of a strategy that will neutralize or minimize the impact of events. A practical approach may also include evaluating, addressing, and reducing the chances that an unexpected event could affect the goal. You may not be able to predict every catastrophic event, but creating a risk management plan can provide a safety roadmap.
Regardless of whether or not your risk management plan is for personal or professional use, identifying an event probability is often considered an important first step in developing a risk management plan. Risks are identified by looking at the conditions that make a given event likely to happen. To do this, you may have to look at the likely outcomes of certain decisions or speculate on the likelihood that an event will occur.
After identifying the risks associated with an event, the next step is usually to assess the impact the risk could have on your business or personal life. You can assess risks by looking at the cost and benefit of mitigating threats. If you determine that the cost of neutralizing the risk is worth the benefit gained, you may choose to proceed with implementing the steps necessary to address the risks. On the other hand, if the costs outweigh the benefits, you might consider an alternative strategy to bear the consequences of the event.
To address the risk, the next step in creating a risk management plan typically involves developing a contingency plan to withstand the impact. Typically, at this point in the plan, you may want to outline the appropriate steps to take based on the likelihood that an event will occur. This contingency plan can also focus on how risk is reduced and how your business or personal goals are affected.
After creating a risk management plan, you can conduct a more in-depth analysis of strategies and contingencies. This exercise can help determine the effectiveness of strategies within the contingency plan and other areas. Another possible benefit is having the chance to recognize an impending event and giving you the opportunity to implement the related contingency plan. The risk management process is fluid as the chances of an unfortunate event not identified in your original risk management plan could occur at any time.