A risk management plan helps reduce the frequency and severity of risks, lowering expenses and exposure over time. Without a plan, an organization is more reactive to risks that are likely to be high-cost and frequent. Developing a risk management plan positions an organization proactively through controls to achieve better risk outcomes in the lower cost range.

1. Advantages of Having a Risk Management Plan
No Plan
High Frequency
High Severity
X High Expense
High Exposure
No Controls
$ Cost of Risk
Reactive Management
Driving down cost of risk using a plan With a Plan
Low Frequency
Low Severity
Low Expense
Low Exposure
High Level of Controls
Proactive Management
Time
1) Do Nothing – Take your chances as to where you end up on the higher band
2) Take Control – Proactively position yourself at the bottom of the lower band