Risk Management Plan as Insurance

16 October 2010

For some businesses their risk management plan is just purchasing an insurance policy against a specific risk their project may encounter. This is one way of dealing with this problem, but it is not always the best solution.

To know what you need the insurance policy for, a company must still have a risk management plan in place so they know exactly what risks they may confront with their projects. This will require the documentation of the procedure to determine these risks.

The first part of any risk management plan is a procedure for identifying all possible risks that a business or project might encounter in its life cycle. This document can be easily made with a project management template that will help guide the user in what is important in this procedure.

The next step in a risk management plan is to determine the impact level of each risk that may or may not come in contact with the project. This procedure for determining the impact level must be documented so there is a consistency in the results.

With the knowledge of what risks are present and their probability of impacting the business or project, the next part of the risk management plan has to be in prioritizing the findings. This way the project manager will be able to know which risk and their impact should be the focus of any mitigation to reduce its impact.

The mitigation of risks is an important part of every risk management plan. In most cases the risks can be dealt with so their impact can be reduced. There are a few where the solution to a risk is actually more costly than just allowing it to impact the project. In these cases an insurance policy is justified.

A properly written risk management plan will help the project manager deal with every risk that might impact their project in the appropriate way. The plan must be documented so procedures are in place because no two risks are exactly the same, nor their impact potential.