What is risk management?

Talking about risks isn’t always comfortable—but in business, it’s necessary. From health threats to natural disasters, organizations face a growing list of potential setbacks. A well-thought-out risk management plan can help mitigate those threats and keep your people, operations, and assets safe.

This post breaks down the fundamentals of risk management and provides a practical framework for planning. Keep reading to learn:

• What risk management is and why it’s important
• The four key steps to building a risk management plan
• How to apply these steps in the workplace

What is risk management?

Risk management is the process of identifying threats to a business, assessing them, and establishing a plan to manage them. These threats can range from data breaches and financial losses to natural disasters and employee safety issues.

The goal of risk management isn’t to avoid risk entirely. (That’s impossible.) Instead, it’s to identify potential problems before they occur and have a plan for monitoring and addressing them. There are four essential steps to the risk management process:

1. Risk identification
2. Risk assessment & prioritization
3. Risk mitigation planning
4. Risk monitoring

We’ll dive into each of these steps in more detail later in this post.

Why risk management is critical for modern organizations

Risk management can help your business plan for unforeseen incidents and circumstances. With a game plan, you can manage, limit, or even mitigate costly setbacks. It can also understand which risks are actually worth taking to enable business success. Here are some additional benefits to establishing a risk management plan:

• Decrease legal liabilities
• Demonstrate corporate social responsibility
• Protect people and assets from potential harm
• Ensure the business is appropriately insured

​In a world where 25% of businesses reported an increase in physical security incidents, companies that proactively manage risk gain a competitive edge. ​

The 4 steps to a solid risk management plan

You now know what risk management is and why every organization should take it seriously. In this section, we’ll dive deeper and outline the four steps to risk management planning. By following these steps, you can help keep your business, properties, and employees safe.

Step 1: Identify the risks

By knowing the risks your organization faces, you can begin the process of managing them. In general, business risks are divided into the following four categories:

• Hazards: Natural disasters, fires, chemical spills, or unsafe conditions
  
  
• Financial: Cash flow issues, market volatility, supplier instability
  
  
• Operational: Technology failures, human errors, compliance gaps
  
  
• Strategic: Shifts in consumer behavior, regulatory changes, bad investments

Bring in cross-functional teams to help uncover risks across departments. This creates a more complete picture and ensures no critical areas are overlooked.

Step 2: Assess and prioritize

Once you've identified potential risks, use a risk assessment matrix to score each one based on likelihood and impact. This helps you evaluate the likelihood of a threat and its potential impact on your business. It should look something like this:

Then, go through each of the risks you identified in Step 1 and assign it a score. Once you’ve completed this step, you’ll know which risks to focus on first (high and medium high risks), and which you’re probably OK to focus on next (medium, low medium, and low risks).

Focus first on high-probability, high-impact risks. Medium and low-level risks still matter—but they can be addressed with proportionate strategies.

Step 3: Create a mitigation and response plan

For each top-priority risk, develop a prevention strategy and a backup plan. 

If data theft is a risk, for example, you might implement preventative measures including increased workplace security to keep your organization’s physical computers safe, anti-phishing training for employees, and encryption of company data. As a contingency plan, you might establish processes to notify your customer base and begin to contain the breach. You might also involve law enforcement and conduct a post mortem on the breach.

If meeting compliance requirements is a risk, your preventative measures might include additional security, including ID checking, block lists, and visitor passes to protect employees and safeguard the workplace. In this case, a workplace platform that supports visitor management can help minimize risk, retaining the right amount necessary to invite people onsite and spur innovation. As a contingency plan, you might establish data backup and disaster recovery plans, and ensure the right folks in your organization are trained up on both.

The key is to build a plan that protects your people, safeguards assets, and allows for a swift response in case something goes wrong.

Step 4: Monitor and update regularly

It’s not enough to come up with a plan. In this final step, you’ll monitor the preventative measures your organization put in place. 

Set a schedule to review mitigation measures, revisit the risk matrix, and make updates based on changes in technology, operations, or the external environment. Use KPIs to track progress—like time to respond, compliance scores, or incident reduction rates.

If one of your risk mitigation strategies begins to slip or fail entirely, your organization can implement the appropriate contingency plan.

Risk management in the workplace

Workplace risk management is a key component of your organization’s overall risk management plan. Be it a traditional office, lab, manufacturing facility, or industrial plant, the workplace is a space for intellectual property, technologies that support business operations, and, most importantly, employees. It’s important to keep everything and everyone within it safe.

Here are some of the common threats to prepare for that can impact the workplace:

• Natural disaster or extreme weather
• Theft of physical or intellectual property
• IT failure of a business-critical system
• Cyberattack
• Utility outage
• Executive protection
• Health threats
• Brand and reputation crises
• Supply chain disruption
• Bad actors

A modern workplace platform like Envoy can help streamline access control, visitor management, and emergency response—key tools in reducing exposure to these threats.

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Risk management may not be the most exciting part of running a business, but it’s one of the most important. The right plan can protect your people, safeguard your assets, and give your organization the resilience it needs to grow—even when unexpected challenges arise.

Whether you’re starting from scratch or refining your current process, investing in risk management now will help future-proof your operations in the long run.

Ready to get on top of your risk management plans? Learn how Envoy can help.

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