A critical component of risk management plans are monitoring systems. The definition of risk incorporates an unwanted or negative event for the organization. After completing the steps to identify risks, their probability, and their negative outcome, organizations should update plans to manage and monitor potential risks.
Many organizations identify potential risks and develop plans to manage them, but do not develop adequate monitoring systems. Systems need to be in place to monitor and report developing risks in a timely and accurate manner that allow management to take appropriate actions to reduce, eliminate, or mitigate their consequences. Establishing a management indicator system that provides accurate, timely, and relevant information in a clear and easy-to-understand manner is key to risk monitoring.
Let’s look at four essential components of effective risk monitoring systems.
1. Risk monitoring is an ongoing process to systematically track and evaluate the performance of risk management actions against established metrics. It should also include the results of periodic reassessments to assess both new and known risks. If necessary, managers should reexamine risk management approaches to determine their effectiveness while conducting assessments.
2. Information must be available in sufficient time for management to take corrective action. An effective monitoring effort provides information to show if management actions are not working and what risks are on the way to becoming real problems.
3. Management should identify specific indicators to monitor and the information to collect, compile and report. Documentation procedures are generally developed as part of risk management planning. Specific details and procedures for risk reporting should be included in risk management plans.
4. To ensure that significant risks are effectively monitored, management actions (including specific events, programs, and “success” criteria) developed during the previous risk management phases should be reflected in the planning and programming of the program. integrated. Identifying these management actions and events in the context in which they occur establishes a link between them and the specific actions the organization is trying to achieve, making it easier to determine the impact of the actions on cost, schedule and Performance. Detailed information on risk management actions and events should be contained in various risk management documents (both formal and informal). The use of an online electronic database that stores and enables the retrieval of risk-related information is almost essential for effective risk monitoring.
Effective risk management plans require fully integrated monitoring systems that include systematic processes and specific actions for monitoring and managing risks. This allows the manager to take timely and effective actions to reduce, eliminate, or mitigate the consequences of negative outcomes posed by risks.