Planning is an essential part of risk management. It helps you prepare for the worst and what happens if something goes wrong. That’s why having a risk management plan is necessary when opening a business.
There are many risks in the restaurant industry and the food and beverage industry that you should be aware of. Whether you’re opening a restaurant, opening a food truck, or another business, developing a restaurant risk management plan will allow you to plan ahead and build business resilience.
It’s important to understand the process of writing a risk management plan in order to prepare for business success. This way, you can improve and expand your business. First, be sure to familiarize yourself with the risk management definition and a few restaurant industry risks.
Risk Management Plan - What Is It?
A risk management plan is also referred to as a risk mitigation plan, and it’s a strategy that helps avoid hazards that may threaten your business. Managing risk helps business owners, managers, and employees prepare for the worst and take action to ensure these risks don’t happen.
Risk management plans typically include:
- Standard practices and procedures for how to avoid potential risks in your business (for example, if you’re in the restaurant industry these would include kitchen fires, slip and fall injuries, and food allergies).
- Instructions regarding how to respond to potential risks and scenarios if they do occur.
- How businesses plan to handle the repercussions of complaints or accidents (this may include business insurance or public relations strategies).
The purpose of having a risk management plan is to easily identify potential risks, evaluate them, and plan for how to deal with them if they do arise.
Key Takeaway: Following a risk management plan for your business will allow you to be one step ahead of the potential issues that arise and a step closer to business success.
6 Steps To Write a Risk Management Plan
The process of writing a risk management plan involves a simple flow consisting of identifying, evaluating, prioritizing, preventing, planning, and monitoring.
1. Identify Potential Risks
When creating a risk management plan, the first step will be to identify all potential risks your business may face. This should happen in the beginning stages of starting your business and periodically as your business grows.
Common risk categories to consider include technical, organization, management, and external. It’s also important to consider the levels of "knowability" regarding these risks. This includes known risks, unknown risks, and unknowable risks.
Four ways to identify risks and which strategy to use to mitigate them include:
- Risk checklists. Your company may already have a workflow in place for identifying risks. If this is the case, it’s a good idea to develop a checklist of risk areas and categories for you to explore.
- Brainstorming. Your employees are the ideal source of information for potential risks. It’s likely that they see firsthand where problems have or will occur. A brainstorming session will allow you and your team to work together to identify risk areas and a plan on how to address them.
- Interviews. Speaking with outside experts, teammates, and project stakeholders will provide an opportunity to shed light on some unknown risks in your business.
- Assumption analysis. Assumptions are a source of potential risks. Consider using the “If, then” analysis to determine risk possibilities within your business.
2. Evaluate and Assess Each Potential Risk
Each risk will have an impact. Once you identify the risks your business faces, it’s time to evaluate and assess the consequences, impacts, and probabilities of each one.
Ask yourself the following questions:
- How likely is it that this risk will happen?
- How negative will the impact be from this risk?
- What will happen if this risk takes place?
The factors above give context and importance to the risks you’re dealing with. They allow you to understand how much you should plan ahead for them and how bad they really are.
During this step of your risk management plan, you should assign a risk probability and impact score to each one. These should range from low to high probability and low, medium, or high impact. The scores will help you prioritize each risk.
3. Assign Each Risk to a Team Member
After you identify and evaluate each risk, it’s important to assign them to a team member. This makes it easy to prioritize each risk and a specific team member will be able to take ownership of the risk if it occurs.
Part of the process of assigning risks to specific team members is understanding the warning signs or risk triggers. These will signify the need for action. If you’re dealing with a knowable risk, the triggers may be identifiable in advance. However, in some cases, it will be impossible to identify the exact cause of the risk.
4. Identify Preventative Strategies for Each Risk
The goal of a risk management plan is to develop a clear path for solving potential problems that arise within a business. Project managers and assigned team members should coordinate a proper response to each identified risk.
Four possible ways to handle a risk that occurs include:
- Avoid. Alter your plans to divert the issue or remove the cause of the threat as a whole.
- Transfer. This strategy is considered to be an insurance policy as it involves outsourcing a part or the whole risk to a different team.
- Mitigation. Take immediate action to reduce the impact of the risk at hand. This may require you to do additional research or testing, or look for alternatives.
- Accept. Assume the potential negative impact or budget and deal with the risk.
5. Develop a Contingency Plan
If you accept the fallout of a risk, you need to know what to do after. Contingency plans help with this, and they should be saved for high-priority and high-impact risks that don’t have an obvious solution.
A contingency plan workflow includes the following steps:
- Find and document resources that may be used in an emergency. For example, diverting the budget or moving team members off of a different task.
- Identify who has to be notified in case the issue occurs.
- Develop a plan of action to deal with the issue and identify potential alternatives to the current project plan.
- Pay attention to risk triggers and deadlines.
6. Monitor Each Risk
It’s possible to run into the same risk more than once. That’s why it’s important to monitor each risk, even if you’ve already mitigated it.
Team members with assigned risks should be held accountable for tracking them, updating them in project management tools, and keeping others informed as to what is going on. It’s possible for new risks to arise in the meantime or for existing ones to evolve and change.
A low-probability risk may turn into a high-probability risk all of a sudden. Using risk management tools can help you track your risks, update them, and keep everyone in the loop.
5 Tips To Minimizing Risk
As a business owner, you can help reduce potential business risks.
Five ways to minimize risk include:
- Get insurance. Insurance allows you to protect your business from accidents, including natural disasters. It gives you peace of mind knowing that you have something to lean on when things get tough. This is similar to eCommerce business insurance.
- Limit your loans. Many people will take out a loan when starting a business in order to have enough capital. This is true for a restaurant business, catering business, chocolate business, and more. While they may help your business, they also pose risks. If you can’t avoid getting a loan, look into securing a manageable loan with low interest. Compare plans from different lenders and secure affordable monthly payments.
- Hold onto important documents. Keeping important documents pertaining to your business is essential. These include sales transactions, tax payments, and operational costs. Having your employees document everything is also important. This includes signing checks and time sheets. Document organization and management are also a must.
- Build a solid reputation. Having a good business reputation is important because it builds trust between your company and your customers. It also makes maintaining your business easier.
Frequently Asked Questions About Risk Management Plans
As a company, one of your top priorities should be to minimize the amount of business risk you have. To do this, you will need a risk management plan. To better understand how a risk management plan will benefit your business, read the following commonly asked questions.
What Is a Risk Management Checklist?
A risk management checklist refers to a list of steps a business should take to identify and minimize the risks they may deal with on a regular basis. These checklists are made to be shared between managers and employees during meetings and training.
What Are the 3 Types of Risks?
The three types of risk include:
- Financial risk
- Business risk
- Non-business risk
These are broad classifications of risk. Keep in mind that there may be more types of risk within each category as you continue to narrow it down.
What Are the Basics of Risk Management?
The basics of risk management include:
- Identifying risks
- Analyzing risks
- Prioritizing risks
- Solving risks
- Monitoring risks
Following these basics will allow you to handle each risk in an efficient and effective manner. When you write a business plan, these risks should be included in the risk management section.