Implementing effective risk management strategies can ensure risk mitigation that aligns with the organization’s objectives. However, managing risk is about incorporating best practices that improve the risk management plan in general. Recent risk management statistics show that 75% of organizations can’t keep up with the improvements risk management programs require to sustain success.
The integration of risk management best practices will help organizations leverage continuous improvement, making sure every part of the risk management plan remains up-to-date and effective, even against evolving risks. Discover a list of risk management best practices with quick guidelines that boost your chances of success and help you grasp business continuity, no matter the emerging risks.
What Is Risk Management?
Risk management in practice is taking a preventative and proactive stance against all risks to help an organization mitigate risks and decrease their risk exposure. Managing risk is about identifying risks, analyzing the potential effects, and choosing the appropriate responses. However, a successful risk management program isn’t possible without following best practices that seal the deal.
Why Is Risk Management Important?
The effective management of risk is integral to risk mitigation efforts, business continuity, regulatory compliance, and risk governance. Evolving risks can offset business objectives and cost the company more money compared to following a risk management best practice that ensures reduced risk exposure and mitigation. It becomes the foundation to your organizational strategy, keeping operations running smoothly and efficiently while reducing the effects of exposure.
Different Types of Risk Considerations
Part of implementing risk management best practices successfully is knowing the different types of risk. Many different types of risks play a role in successful risk management processes:
Compliance Risk
A compliance or governance risk is one of the key risks that should form part of all risk management strategies. All companies must comply with specific regulations and requirements, and the failure to do so will result in hefty penalties. Risk management statistics show that 39% of organizations worry about compliance risk identification and mitigation.
Financial Risk
Financial risk is another one of the types of risk every organization should consider when managing risk. A financial risk has the potential to negatively impact the organization’s profits, even on the bottom line. For example, financial risks can materialize during transactions, when making new deals or partnering with new companies, or when compiling financial statements.
Geopolitical Risks
Focusing on transnational risks have become a cornerstone for any company seeking business continuity. The top geopolitical risks in 2025 include climate, trade, supply chain, energy security, social unrest, geopolitical upheaval, and market volatility risks. These risks can originate from social, economic, military, or political changes that impact your business within your organization’s country.
Operational Risks
Operational risks are any threats or disruptions to the daily operations within your company. For example, supply chain disruptions could delay product development or the ability of your employees to carry out their daily tasks. Operational threats are common, and adding them to your risk management programs will ensure you’re managing risk directly associated with your internal processes.
Reputational Risks
Reputational risks are those that could cause reputational damage for your organization. Risk identification would involve finding any part of the business strategy that could cause the public or media to see your organization in a different light. Understanding reputation and its risks reveal how 70-80% of market value comes from an organization’s objectives, equity, and goodwill.
Security Risks
Security risks include a data breach, data leaks, and other cybersecurity threats that could cause the inappropriate access of sensitive data within your company, whether from an external or internal source. However, security risks go beyond a data breach. They also involve risks to the actual premises, such as breaking and entering, stollen products, or even a failed alarm system.
Strategic Risks
Strategic risks include any threats that could have an impact on your business objectives or business strategy. Any change to your company strategy or objectives could open up new risks that affect every function and process. Some potential risks that arise may originate after changing software, processes, or even leadership. The Boston Consulting Group says 79% of leaders prioritize strategic risks.
Unforeseen Risks
Finally unforeseen risks occur more often than expected, including those caused by fires or natural disasters like floods, earthquakes, and tornadoes. An organization’s objectives are at risk from these disasters, especially those situated in regions with frequent floods and tornadoes. Risk management strategies should include risk mitigation efforts for natural-born disasters.
Implementing the Best Practices for Risk Management
Incorporating industry-leading practices in your overall risk management strategy will make sure you reduce any potential impact of risks, whether old, new, or evolving. Implement these practices in your risk management plan to grasp the benefits of continuous improvement and minimize exposure:
Understand Your Risk Appetite to Prioritize and Mitigate Risks Effectively
Understand and define your organization’s risk appetite by identifying how much risk your company will accept before implementing risk management activities that lead to business continuity. Defining your risk appetite is integral to management versus mitigation strategies.
Your risk appetite should outline how much risk your company is willing to take before responding. These threats won’t require any risk response, but anything outside of this category will require effective mitigation strategies and further prioritization.
Implement Company-Wide Risk Accountability and Ignite a Risk Culture
Managing risk is a team effort, Start sharing responsibility by assigning a risk management team that will thwart potential risks. Involve all stakeholders and employees in the risk management plan, assigning responsibilities and forming the ultimate risk culture with shared values, beliefs, and efforts.
Communication and a shared responsibility will make sure everyone takes action when potential risks arise. Implement effective team communication from the onset to make sure everyone is involved with the risk assessment and management process, with frontline employees reporting potential risks.
Use Built-In Buffers to Manage Project-Specific Risks During the Project Scope
Some risk management best practices are ideal for discreet risks that may unsettle the organization’s objectives, such as once-off projects with precise deadlines. The best risk management practices for specific projects is to build buffers into the project plan before it starts.
The buffers would include resources, funds, and dedicated timeframes that allow teams to manage risks effectively when things go wrong. For example, having a dedicated budget for risk management in a project could become the buffer for unexpected project overruns.
Conduct Regular Risk Assessments to Update the Risk Management Plan
It goes without saying that it’s essential to improve your risk management capabilities by conducting frequent risk assessments, especially in a volatile risk environment. Identifying risks on a set schedule or every time a major operational, budgetary, or technological change happens is important.
New risks are always possible, regardless of your mitigation strategies. Information risk management security spending worldwide is set to reach a value of $310 billion by 2028, which would be up from $210 billion in 2024, showing how leaders value the need for continuous risk monitoring and updates.
Create a Contingency Plan for a Worst-Case Scenario to Reduce Consequences
The ultimate risks management program will plan for the best and worst-case scenario. Identifying risks that your company may not be able to mitigate helps contingency planning that reduces the negative impacts of a massive disaster or unavoidable risk.
Contingency plans specific to systems, network connectivity, employee safety, cybersecurity, or even natural disasters can reduce injuries, outages, or complete system failures when things go wrong. A contingency plan against power outages would be to install backup power systems.
Use Minimum Viable Product Development to Make Early Improvements
One of the leading risk management practices related to any product or software development is to use minimum viable product (MVP) development. The risk minimization technique allows organizations to develop products and software with basic features, identifying risks before full-scale development.
A manufacturing company may develop an MVP or concept for a product that could be launched in a testing stage that allows them to gather feedback from customers before developing the final product. Identifying risks using customer feedback is one of the ultimate methods for any development project.
Conduct a Risk-Reward Analysis to Find Opportunities for Taking Some Risks
Conduct a risk-reward analysis when managing risk while looking for potential opportunities. Organizations successfully mitigate risks while understanding the opportunities related to some potential risks if they can reduce the exposure to achieve the organization’s objectives.
Weigh the risks against possible rewards because the opportunities can often outweigh the impact which may or may not occur. However, it’s better to move risks to another risk analysis type if you can’t identify any possibility of rewards should your company manage to avoid the risks.
Use the Root Cause Analysis to Identify Lessons Learned and Make Updates
A successful risk management plan should include the continuous risk monitoring that allows companies to learn from the mistakes previously made when risks were realized. Keep a risk register after identifying risks that already occurred as a root cause analysis can highlight what went wrong.
Reviewing how risks were previously managed will outline what didn’t work so that you can improve risk mitigation strategies for future risks. Streamline and optimize any future risk response from your risk register by changing and improving the strategies based on previous failures.
Welcome a Third-Party Risk Assessment Periodically for Improved Results
Conduct periodic third-party risk assessments with providers who use other risk management techniques that could identify potential risks you may have missed. An external provider can use a comprehensive risk analysis from a different perspective to improve risk management techniques.
Some may conduct a risk assessment using the risk matrix analysis or a quantitative and qualitative risk assessment. They may also use the bowtie model, decision tree, SWOT analysis, or fault tree analysis. Getting a new pair of eyes on the risks that could derail your management plan is a best practice.
Outline Clear Risk Management Practices and Policies for Faster Reponses
Having an entire management team on hand is one thing, but helping them to understand what must be done when risks occur is another. Managing risk becomes a viable team effort when all employees and stakeholders have access to the clearly defined management practices or policies.
Suddenly, everyone is identifying risks, managing risks, and reducing the impact or consequences of each one by following the visible management practices. Document roles, responsibilities, procedures, and incident response plans for easy accessibility by anyone involved in the processes.
Monitoring Risks Continuously Ensures That Responses Are Fast and Efficient
Risk mitigation, risk assessment, risk management programs,
Use Risk Management Frameworks Trusted By Global Industry Leaders
Risk management professionals and industry leaders use different risk management frameworks with well-defined guidelines that work across multiple industries. Try one of the management frameworks designed to reduce exposure and mitigate the impact of serious risks:
- ISO 31000 Family: It’s the risk assessment and management guidelines set out by the International Standards Organization.
- NIST Risk Management Framework (RMF): The risk management techniques and guidelines set out by the National Institute of Standards and Technology, including the Cybersecurity Framework.
- The ITIL Framework: Guidelines and best practices set out by the Information Technology Infrastructure Library that manages risk in IT setups and maintenance.
- COSO Enterprise Risk Management (ERM): Risk management best practices and guidelines set out by the Committee of Sponsoring Organizations’ enterprise framework.
- COBIT Framework for Risk Governance: The guidelines and best practices underlined by the Control Objectives for Information and Related Technology, which is ideal for AI-driven systems.
Leverage Common Risk Management Techniques in the Mitigation Plan
A successful risk management plan also follows standard risk management techniques. Business leaders and risk managers often categorize risks into the following segments as part of the best practices that reduce the consequences or exposure:
Risk Acceptance
Risk acceptance is another one of the common risk management techniques after identifying potential threats. Leading organizations understand that some minor risks are inevitable and should be accepted, an approach that highlights a company’s readiness to respond to risks if they unfold.
Companies accept low-probability risks, which is particularly useful for risks outside of the company’s control. For example, a company may decide that the probability of data leaks with a current system exists, but they choose not to upgrade because it’s cheaper to maintain and secure the existing one.
Risk Avoidance
Risk avoidance is one of the risk management techniques implemented when new risks could be introduced to the organization through certain actions, which are then avoided to reduce those risks and ensure the organization remains resilient.
It isn’t always possible as rewards often come from taking risks, but some risks can be avoided entirely. For example, a multinational company is deciding whether it would be a good idea to introduce new data analytics, but after some risk analysis the company determines that the risk outweighs the reward.
Risk Mitigation
Risk mitigation involves a company implementing control measures to reduce the impact or likelihood of a risk occurring. The technique is famously used to minimize risks while maximizing potential rewards after conducting a risk-reward analysis and identifying risks with possible advantages when avoided.
For example, the company deciding whether new analytics can outweigh the potential threat of a breach may choose to mitigate the security risks by investing in more stringent security layers if the potential for personalizing recommendations based on data outweigh the impact.
The company will, however, implement various mitigation strategies, including:
- Providing extensive employee training
- Integrating advanced security technology
- Conducting frequent security audits
- Outlining comprehensive incident response plans
Risk Prioritization
Risk prioritization is one of the best practices used by business leaders managing large corporations and professional risk managers. The goal is to prioritize risks through analysis techniques to determine which risks should be mitigated before others, which is essentially important with limited resources.
For example, identifying risks in security, operations, and reputation during a system audit would require a lot of time and resources to reduce or mitigate. In this case, a risk manager will use a risk matrix or other assessment technique to determine which risks are more probably and have greater impact.
Risk Reduction
Risk reduction is one of the other risk management techniques companies deploy. It’s the most common technique used for company-wide risks associated with daily operations like manufacturing procedures, employee training, and processes that can’t be changed but put workers in harm’s way.
The organization will then deploy a comprehensive list of controls and procedures to reduce the impact of these risks should they occur. For example, companies conduct regular fire safety assessments to make sure the risk to employees and equipment remains and fire hazards are reduced or eliminated.
Risk Transference
Risk transference is another essential part of risk management programs, where an organization remains resilient by transferring the impact of a certain risk to a third-party, vendor, or supplier within the company’s supply chain. The technique redistributes the consequences of a risk when it occurs.
However, risk transference requires intricate negotiations and contractual agreements. Still, an example of risk transference is when a multinational organization has multiple steps in their digital processes, with some being outsourced to a third-party provider. The provider takes some of the risks by contract.
Always Follow a Step-By-Step Program in an Effective Risk Management Plan
A successful risk management program includes various risk management processes that identify, mitigate, and monitor risks daily. Effective risk management is about implementing the steps frequently to make sure you don’t miss hazards or can learn from past mistakes.
Step 1: Risk Identification
Use frequent risk identification processes to identify new or emerging risks as part of your risk management plan. Barret Business Services Incorporated suggests that you schedule risk assessments at least once every two years but preferably every year. Here are more situations that require you to identify new risks:
- Any changes occurred in business processes, staff, or equipment
- Any new technology was developed and introduced
- The company changed premises or added more space
- Regulatory requirements for your industry were upgraded
Step 2: Risk Assessment
Conduct risk assessments frequently once you’ve identified new risks, adding each one to the risk register after the risk analysis. Use any or more than one of the risk analysis techniques recommended, including a SWOT analysis, risk matrix, decision tree, fault tree analysis, or root cause analysis. Using multiple risk assessment techniques improves the results and controls.
Step 3: Risk Controls Assessment
The same way you assess risks is how you’ll evaluate potential control measures to choose the most effective response for any hazard in the risk register. The risk management team must know what to do once the best mitigation strategies or control measures were identified during an assessment like the risk matrix, decision tree, or risk-reward analysis.
Step 4: Risk Management Technique Implementation
Comprehensively document all risk management processes and responses the risk management team must implement in the case of an occurrence or realization, whether choosing to avoid, accept, or mitigate risks. Allocate the resources and budget for handling the impact before risks unfold. That way, you can consider the cost of the mitigation strategies without going in blindly.
Step 6: Risk Monitoring and Reporting
Continuous risk monitoring is essential for a successful risk management program because it could highlight unforeseen risks or help you identify responses and controls that aren’t working. Risk monitoring enables you to improve the management process to reduce the likelihood and impact of any potential threat, including security, operational, geopolitical, strategic, and evolving risks.
Best Practices for Risk Management Processes Conclusion
Efficient management programs use different risk assessment techniques, practices that streamline the entire process, and simple yet highly effective internal practices. Prioritize some risks, avoid those that don’t align with business objectives, and ensure business continuity with simple practices and guidelines. Remember to use third-party analysis from time to time, ensuring complete management.
Risk Management Best Practices FAQs
What are the 5 T’s of risk management processes?
Some risk assessment and management programs use the 5 T’s to efficiently manage and contain risks. Effective risk management programs prioritize risks they must treat to reduce the impact, those they can tolerate with low-probabilities, and risks they can transfer to share the impact. They also terminate the risks with high-probabilities and take the opportunity when rewards outweigh the risks.
What are the 4 C’s of risk management processes?
A risk management plan that focuses on managing risk through the 4 C’s use communication, control, compliance, and continuity to improve management efforts. They implement effective communication between stakeholders, control the risks they can, ensure compliance to reduce risks, and focus on business continuity efforts that guide how they mitigate threats.
Is the MoR certification worth the effort?
Professional risk managers with the MoR certificate follow risk management best practices, use the latest frameworks, and ensure effectiveness with a combination of various risk assessment techniques. These experts implement the MoR principles to enhance decision-making processes, improve project outcomes, and reduce uncertainties.
