Risk management is the practice of identifying, assessing, avoiding, mitigating, transferring, sharing and accepting risk. Contingency planning is the practice of identifying steps to be taken if a risk occurs.
Risk Management vs Contingency PlanningRisk management is primarily focused on steps taken before a risk occurs. This can include techniques of reducing risk such as risk avoidance and mitigation. Risk management is also a process of formally accepting risks that are worth taking.Contingency planning is planning steps to be taken when a risk occurs. A risk that actually occurs is generally referred to as an issue. It is common for issues to be managed as they occur without any pre-planning. Contingency planning is most often used for risks that are low probability but high impact such as a disaster.
Key DifferenceThe primary value of risk management is finding ways to prevent losses before they occur.The primary value of contingency planning is improving the chances of surviving high impact risks.
Key Relationship One aspect of mitigating risks is considering what to do when the risk occurs. Therefore, contingency planning is often viewed as a component of risk management.
|Risk Management||Contingency Planning|
|Definition||The identification, assessment, reduction and acceptance of potential losses.||Pre-planning steps to be taken if a risk occurs.|
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