What is Risk Monitoring?
Risk monitoring is tracking and evaluating risk levels in a business.
Risk monitoring activities fulfil part of the risk management strategy by acquiring data via automated or manual methods. The data is then used to alert and report information relevant to:
- the control of risk management
- providing inputs to ongoing risks
- updating new risk assessments
- updating response procedures
As it will depend on current business priorities, risk assumptions, risk appetite and risk tolerance levels, the risk monitoring methods applied at any specific time may differ from what is documented in the risk monitoring strategy.
To promote the overall company risk management goals and avoid any duplication of monitoring, it’s recommended that businesses coordinate monitoring procedures across all company sectors from a single responsible department.
What is the purpose of Risk Monitoring?
In addition to monitoring the current risk profile, monitoring also tracks and evaluates the effectiveness of risk management frameworks and strategies.
An effective risk management framework requires a risk review structure to ensure new or emerging risks are effectively identified and assessed and that the correct risk control and mitigation actions have been applied.
Risk audits of policy and standards compliance are also performed to identify improvement opportunities.
It should be remembered that businesses are dynamic and operate in active environments. Changes in the company and the environment in which it operates must be identified (internal and external risks), and appropriate adjustments must be made to systems and actions.
The monitoring process should ensure appropriate business activity controls and procedures are understood and followed.
The monitoring and review process should determine whether:
- the measures adopted resulted in what was intended
- the procedures implemented and information gathered for undertaking the risk assessment were appropriate
- improved knowledge or further information is helping reach better decisions
- identify what lessons could be learned for new risk assessments, risk analysis and management of risks
What are the types of Risk Monitoring?
Risk Review
Risk reviews should be included on the agenda of frequent management meetings to help with improved change management and continuous development.
Regular risk reviews examine and document the effectiveness of the risk response plan in dealing with the overall business risk and identify individual potential risks. The continuous monitoring and management of risk also ensure that risk control and mitigation strategies are implemented and are progressing effectively.
The scope of monitoring risk includes identified risks, risk reassessments, risk audits, technical performance measurements, and progress meetings.
The primary input to the risk controlling and monitoring process is the watch list of the prioritised risks that have been identified for risk control and mitigation actions.
Risk monitoring also ensures that relevant controls and procedures for the risk management strategy are fully understood and adhered to, allowing confirmation and/or generation of:
- all information on risk management methods is suitable
- improved knowledge was attained and used to identify what lessons might be learned for future business decisions
- revisions to the risk register, supplemented with new action items for the risk response process
Risk Audit
A risk audit examines and documents the effectiveness of risk responses in dealing with recognised risks, their root causes, and the effectiveness of the risk management process.
Conducting a risk audit is essential for developing a risk event management plan. A risk audit involves identifying and assessing all risk processes so that the risk management plan and contingency plan are robust enough to deal with the occurrence of an undesirable event.
A risk audit can also help ensure that each process is performed and is frequently conducted throughout the business to verify that it stays on track and is in good shape.
Why is Risk Monitoring so important?
There are many different reasons to take a risk. However, no matter the reasoning, risk monitoring is an essential part of the process.
Risk monitoring involves analysing information and then making an informed decision. This is applied in many different ways.
Risk monitoring is a critical part of any risk management process. When it’s done correctly, it can help a company minimise losses or accelerate profit. It is essential to have risk monitoring software to let you know what is happening in the business. The software will help you identify the top risks and will help you see which ones to focus on. It is also vital to monitor risk control and mitigation processes. When done correctly, the control and mitigation actions may manage a potential risk event before it becomes an issue with the associated potential impact.
Risk monitoring is an essential aspect of business processes. A risk is anything that might be a threat or opportunity, so it is crucial to monitor risk closely. This includes monitoring risk on a global or local level, checking for patterns in risk, identifying the risk trigger (cause), and identifying what might cause a risk event.
What is a Risk Monitoring plan?
One way is to monitor risks through a risk monitoring plan. A risk monitoring plan is a specific program a business uses to monitor risks. The program is designed for the company to assess the management of risks to provide an accurate picture of the risk status.
Many assume that risk management and monitoring plans are the same; they’re not. The risk management plan documents the whole process, including risk identification, evaluation, control, and mitigation efforts. It also includes the risk monitoring plan.
The plan documents and monitors potential risks to a business and the organisation’s steps to keep those risks acceptable. A company may have many monitoring plans to address different risks in different parts of the business. However, this must be collated and provided in a single depository for senior management to understand the overall risk profile and manage any action required.
A range of key stakeholders must be used to develop the risk monitoring plan. These should include senior management, risk owners, risk managers, compliance officers, heads of departments, etc. Regardless of the scope of risk monitoring, the program must be developed by stakeholders who know how to identify and understand various existing and potential risks and have the authority to change the actions taken to control and mitigate these risks.
Final Thoughts
When it comes to risk management, you need to know that the best-laid plans can go awry, and if you’re not careful, you can risk losing everything you have worked so hard for. The fundamentals of risk monitoring are:
- Creating a risk monitoring plan(s)
- Conduct regular risk reviews
- Conduct risk audits
Remember, when it comes to risk management, you need to be proactive, not reactive!
We hope this article has given you some valuable tips for your risk monitoring! It’s our goal to make sure that everyone is aware of the risks of their business and the steps towards managing risk.
If you want to learn more about managing risks and increasing your business’s chances of success, please visit our blog posts at GetRiskManager/Blog.
