Introduction:

The risk management cycle is a model organizations and project managers use and is fundamental to their risk management framework. This cycle includes the steps taken to reduce risk and can be modified according to the needs of the organization or project. The risk management cycle featured in this article will focus on four areas. These include identifying the risk, analyzing & evaluating the risk, treating the risk, and monitoring the risk. 

Step 1 – Identifying the Risk:

The first step in the risk management cycle is identifying your risk. Your risks can vary depending on your work, but there are some common categories of risks to be aware of. Below are a few risk categories you may face within your organization or project:

– Operational risk

– Reputation risk

– Financial risk

– Security & fraud risk

– Legal & compliance risk

– Environmental risk

When identifying your risks, your list must be accessible to everyone on your project or within your organization. All employees may have different backgrounds or insights on various scopes of your work. It is important to get the most value from your risk identification, and thus the most risks can be identified if everyone can offer their input. 

Step 2 – Analyzing & Evaluating the Risk:

After identifying your risks, you must know their likelihood and severity. Not all risks are equal, and your organization may not have the resources to combat every risk. When analyzing your risks, you should be aware of their impact on your project or organization. More severe and likely risks should be given the most time and attention. Less likely and less severe risks should be addressed but should also receive a lower priority than the others. 

Step 3 – Treating the Risk:

Once you’ve analyzed and evaluated your risks, you must find a way to contain or prevent them. How you treat your risks may vary depending on the threat they pose, their severity, their likelihood, and the category they are in. It is vital to work with professionals within your organization and experts within the category of risk you are treating. For more ways to reduce risk within your organization or project, read one of our other articles, “Controls to Reduce Risk & Pitfalls to Avoid.”

Step 4 – Monitoring the Risk:

Finally, it is essential to note that not all risks can be contained or prevented. Some, such as environmental risks, can occur at any time and must always be considered. As time passes, more data and information may inform how you deal with a risk. Because of this, you may devise a solution for a risk or find a way to contain it better in the future. That is why you should review and update your risks, often, to increase your awareness and devise new strategies to deal with them.

Conclusion:

Knowing the steps of the risk management cycle can significantly benefit anyone on a complex project or within an organization. As mentioned, the risk management cycle can be different for every task. It can be modified and expanded to meet the needs of whatever you may need it to. Not everyone may face the same risks, but we all deal with them. Knowing how to identify, analyze & evaluate, treat, and monitor even the most basic risks will help you deal with more complex ones. We hope you find this knowledge helpful and that you can implement our cycle or make your own!

Sources Used:

Thomas, Christine. “Five Steps of the Risk Management Process.” 360factors,

Five Steps of the Risk Management Process

“What are the 7 types of risk?” Strike Graph, https://www.strikegraph.com/blog

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