On Prime Day, Amazon had a single hour of downtime, which saw them lose up to $100 million in potential sales. Among the main reasons it was able to recover quickly from the downtime is its strong risk management plan. Without risk management being an integral part of their strategic decision making, most large enterprises wouldn’t be as formidable as they are.

Which begs the question, how fast can your business recover from website downtime, let alone reputational damage? Ideally, your business functions in a risky environment. The more control you have over how your business reacts to these risks, the easier it will be to propel your business forward.

If a risk becomes a reality, you could lose customers, sales, and even business partners. The trick to avoiding this scenario is to have a strong business risk management plan.

Here is how to create a plan that will serve your business optimally:

Identify the Risks Your Business Faces

The first step to building a strong risk management plan is to actually recognize the risks you face as a business. These risks can come in many formats, including:

• Operational risks
• Compliance risks
• Liability risks
• Health and safety risks
• Financial risks
• Strategic risks
• Competition risks
• Security risks

You should list down the risks your business might face, regardless of how small they might feel. Start by brainstorming the obvious risks with employees. These might be risks that they face during the ordinary business day.

Some risks might be less obvious and are best drawn from other sources. You can consult industrial experts, attend workshops, and analyze other businesses or the competition. Assessing your business’ history could also help you identify recurring risks that could affect its future.

Assess and Rank the Risks

While some risks could easily maim your business, others will barely make any impact. Since you might have limited resources for dealing with the different risks, you ought to rank risk according to how much they can alter your business. However, you need to first quantify the risks. You can do so through analyzing:

• The impact of each risk
• The probability of each risk occurring

Use a scale to quantify the risks. For instance, you can rate a risk anywhere from 1-10 or in percentages depending on its severity. Once you are done quantifying the risks under both criteria, proceed to create a risk matrix. The matrix simply involves multiplying the impact and probability of each risk.

You can then use the figures that come up to rank the risks. High severity risks will typically have large figures and should be allocated enough attention and resources.

Treat the Risks

You typically have four risk treatment options- avoidance, ignorance, transfer, and mitigation. The best risk treatment option for a risk will depend on your risk tolerance levels.

1. Risk Avoidance

Some risks might be too big for your business to handle internally or through outsourcing to other parties. For instance, your financial capacity might not allow you to open a business in a specific location while being compliant with the relevant regulations. Proceeding with the project will only incur fines and result in distrust from customers. For such risks, it best to avoid them. This can best be done by limiting your business’ exposure to anything that will lead to the risks.

1. Risk Transfer

Some risks might best be handled by a third-party. For instance, you might want to get some legal work done, but hiring in-house employees will result in you needing to comply with specific labor laws. However, the chances of you being compliant might be too low. Outsourcing such tasks to a legal firm will transfer the risk to it.

1. Risk Mitigation

For risks that you can easily handle in-house, look for ways to reduce them. For instance, the risk of getting malware sent to your corporate network could easily be limited by investing in a strong Firewall. If you can, proceed to invest in one.

1. Risk Ignorance

This option is best reserved for low severity risks. These are risks that are within your risk appetite and will barely cause any harm to how your business functions. Simply accepting the risk will suffice.

Monitor the Risks Control Measures

Risk landscapes are ever dynamic. While you might think of a risk as low severity today, it might grow into something quite consequential tomorrow. For instance, a competitor that you previously thought as trivial could launch a product that threatens your market share.

This is why revisiting risk control measures is essential. It allows you to identify outdated control measures or any new risks that might have come up. Ideally, you should delegate the risk monitoring role to different employees, depending on their skills’ relevance to the different risks. If you have someone constantly focused on the threats your business faces, it will be easy to spot changes early.

Employee education is an essential part of a strong risk management plan. From recruits to current employees, all staff members need to be trained on the risk control measure you choose, especially if it affects their role in your business. Besides, your workforce is your first line of defense against most risks.