Risk management plan should be framed for every company. If a startup plans about risk management early then it would be able to be able to improve the efficiency of the processes early. But there is one question that most entrepreneurs have and that is – how much should you really spend on risk management? Risk management plans are based on the fact that when a threat is predicted and averted, the costs incurred in repairs and corrections can be cut down. So how much cost can this risk management plan really incur?
Keep it in your budget planning
Risk management plan should be part of your periodic budgeting. When you allot funds for the various aspects of the project, risk management plan should also form a significant part of the plan. Some companies outsource risk management and assessment. And there are others that do it in-house. In both the cases, there is an expense involved. To do it in-house there should be a team formed to identify and analyze the risks and they would also have to be equipped with all essential risk management tools. Enterprise risk management should thus be an important part of budgeting.
Costs might depend on the dependencies involved
If there are too many interdependencies, then there might be several internal and external factors that influence the chances of occurrence of the threat. And the risks might be dependent on one another as well. So to avert one, you might have to go deeper and hit the root of it all. Such risks that lie at the root of the major issues are the ones that might be more expensive to manage.
Response and recovery costs
If the threat is handled on time there can be a lot of money saved. Understanding the costs incurred if the risk is not prevented is one way to identify the priority of the risk. Another way to set priorities is to identify the dependencies as mentioned earlier. So narrowing down the list of high priority risks would also help in budgeting for risk management. The teams would then be able to plan for the costs incurred in response and recovery after a disaster that could not be averted. This whole sequence belongs to the risk management plan.
The complicated nature of risk management is what makes it essential to rely on none other than experience risk management professionals to complete the plan.