Navigating Risk Management: 4 Practical Insights to Consider
Thursday, June 13, 2024
Risk management is a fundamental practice that enhances operational efficiency. It’s essential for preventing and mitigating risks, such as running over your organization’s budget or violating legal regulations, so that you can focus on delivering promised services to your beneficiaries.
By proactively managing risks, you’ll ensure nothing gets in the way of driving your mission forward.
In this guide, we’ll explore four top tips to follow when managing risk for your organization. To visualize how you can navigate risk management, we’ll use a hypothetical healthcare organization, HealthyCare Clinic, as an example. With that in mind, let’s get started!
What Is Risk Management?
Risk management is the systematic process of assessing potential risks and formulating a plan to effectively mitigate them. These risks may relate to an organization’s financial activities, operations, or external factors.
For example, HealthyCare Clinic might identify the risk of budgetary oversight for patient outreach and develop a plan to allocate its resources more effectively. The clinic could also assess patient health risks to predict the cost of healthcare and ensure services are delivered equitably. Arcadia defines this process as risk adjustment analytics, which predicts a patient group’s likelihood of using healthcare services and the associated costs.
4 Tips to Navigate Risk Management
1. Create a Risk Management Strategy
Uncertainties are always present, no matter your unique operations or financial situation. The best approach to risk management is to be prepared with a comprehensive management strategy that outlines what steps you’ll take to prevent and address certain risks.
Your management plan should cover the following steps:
- Identification: Review your organization’s collected data, such as financial statements or constituent information, to identify risks related to your operations. Specific occurrences, such as past incidents and organizational processes, can help determine what risks your organization faces.
- Assessment: Evaluate the probability of a risk becoming a reality and its potential consequences to your organization.
- Mitigation: List the actions you can take to prevent risks from occurring and create a response plan to enact in case they occur. Delegate the tasks of your plan to team members as they relate to each individual’s responsibilities.
Let’s say HealthyCare Clinic aims to ensure equitable healthcare delivery. To fulfill this mission, the clinic should analyze patient data to identify underserved groups or high-risk individuals who may lack the care they need in the future.
Then, HealthyCare Clinic can assess these risks to forecast future healthcare utilization and costs. This way, they can not only offer treatment plans to proactively address the disease but also help payers build health insurance plans based on a patient’s risk score.
2. Collect Thorough and Accurate Data
Your organization can’t identify risks without contextual information to help predict the likelihood of challenges arising. However, data must be accurate and comprehensive to provide reliable insights into an organization’s potential risks.
According to NPOInfo, organizations must practice good data hygiene, which involves verifying existing data and appending new data, to effectively utilize the information at their disposal. Detailed data allows for targeted risk identification and mitigation so you can accurately predict and address upcoming challenges.
For example, HealthyCare Clinic may use a modern healthcare data platform to organize electronic health records (EHRs), member data, claims data, and care coordination data. As a result, the clinic is equipped with a holistic view of patients’ health statuses to guide their risk assessments.
3. Use SWOT Analysis to Identify Potential Risks
Accurate and thorough data collection is only beneficial if you put it into action and obtain valuable insights from it. To guide your risk identification process and make the most of your data, use a SWOT analysis.
SWOT analysis is a method of evaluating the strengths, weaknesses, opportunities, and threats associated with an initiative. While this method is typically used to plan for specific projects, its components can also be used to identify potential risks in the following ways:
- Strengths: Note any areas of over-reliance, whether that is a funding source or a tool in your technology stack. For example, HealthyCare Clinic may rely on a robust EHR system but lack the staff training to ensure new employees are familiar with the solution.
- Weaknesses: Identify areas that could be improved, such as the need for better accounting practices or more streamlined solutions, for a direct impact on your operations. For example, if HealthyCare Clinic’s data platform is outdated or not interoperable, it may lead to decreased quality of care.
- Opportunities: Look ahead to opportunities for risk avoidance. For example, identifying high-risk patients early enough enables HealthyCare Clinic to provide proactive treatment recommendations and educational materials to help patients self-manage if possible.
- Threats: Spot the immediate risks that need to be monitored and managed. This could refer to a wide range of challenges, such as cybersecurity, fraud, or compliance risks.
When conducting a SWOT analysis, remember to consider both internal and external factors affecting your organization’s goals. Additionally, check for any interconnected risks, or challenges that can compound each other. A holistic approach to risk identification can ensure nothing slips through the cracks.
4. Prioritize Risks Based on Likelihood and Impact
Some risks are more likely to occur than others, and some have greater consequences than others. Your risk management plan will largely depend on your prioritization of the risks facing your organization.
After you’ve identified potential risks, rank them in order of importance using the following strategies:
- Risk scoring: Assign a numerical value to each risk according to its likelihood of happening and its potential impacts. For example, HealthyCare Clinic might measure patient risk by equating each individual’s health status to a number, or risk score. A patient with a higher risk score may be more likely to contract a severe disease, whereas a lower risk score might indicate the patient is likely to remain healthy.
- Risk matrices: Plot risks on a grid, with one axis representing the probability of the risk occurring and the other representing the severity of its impact. The graph will highlight the risks that are most likely to happen and would have the most severe consequences.
- Scenario analysis: List potential risk scenarios and develop detailed narratives for each to examine their potential outcomes. This way, your organization can predict the likely outcomes of specific risks based on their unique circumstances and impact. Additionally, this can help you gauge how certain risks could evolve over time.
Continually monitor each risk’s significance to ensure your mitigation strategies are effective in reducing risk over time. Tracking key risk indicators and assessing your risk management plan through regular audits can give you the insight needed to adjust your plan over time. Additionally, as new risks crop up, your organization will have a standardized plan for identifying challenges and preventing them before they even occur.
As you cement your risk management plan, keep your team in the loop with regular training. Your approach should be consistent across teams and departments, so extra guidance in implementing the plan can help ensure everyone is on the same page. That way, no matter what challenges arise, your team will be equipped to handle them with confidence!