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integrating risk management and planning

Is your risk assessment well integrated with your business planning and organisational control processes?

This integration is not easy to achieve, but if done well the stability of both the planning and risk systems is greatly increased.

Firstly, if the risk management system is quantified and based on the business plan, then the probability of achieving the plan can be determined and the Board can confirm their acceptance of any risks involved.  Deviations from plan can then be sensed at an early stage and corrected promptly.

Organisations need to include in their evaluation the main ways that things may go better than plan as well as the chance that risks will materialise; otherwise the whole picture will be unduly pessimistic!

To achieve integration the risk map should include strategic and political risks as well as operational ones, and should be updated as part of the business plan production process.  Actions to mitigate risks can then be included in the planning process, and the risk assessment can include the latest developmental ideas. 

Given a structure of business plans and associated quantified risks, we show clients how to log risk materialisations as they occur, and how to use this analysis to form the basis of their systems for analysing variances against budget. This will produce a further degree of integration and give greater control.

This transforms the analysis of risk materialisations and variances from being a process which occurs so much after events that it isn't of much help in controlling progress, to one where it is a key tool in ensuring plan achievement.