The purpose of risk management is to anticipate and address factors that may cause harm or loss. It is a structured process in which potential risks are identified, prioritized, and assessed so that strategies can be developed to mitigate them. This proactive approach helps communities reduce the likelihood and impact of negative events such as natural disasters and public health crises, as well as manage less urgent but still significant issues like government spending, infrastructure projects, and program implementation.
A risk management approach typically includes the following steps:
- Developing a detailed description of the issue under consideration.
- Identifying key factors that represent potential losses and benefits.
- Prioritizing those factors according to their significance and impact.
- Comparing the potential gains and losses of various proposals to achieve the greatest benefit at the least acceptable risk.
- Documenting the findings and results.
Risk Management (CRM) provides a clear, reasoned, and transparent decision-making process. Many local government departments—such as emergency services, water utilities, and public works—already use aspects of risk management as part of their regular planning and reporting.
CRM can be applied in many areas, including:
- Cost Control and Budgeting: Identifying risks such as cost overruns, delays, or fraud helps ensure that funds are directed to programs and infrastructure with the highest need and lowest long-term risk.
- Vendor and Contractor Evaluation: Assessing vendors not only on cost but also on performance risks—such as litigation history, missed deadlines, or poor quality—can prevent future losses.
- Insurance Cost Management: Implementing safety programs and loss prevention strategies can reduce insurance claims and premiums.
- Legal Liability Prevention: Reviewing policies and practices to prevent discrimination, harassment, or zoning errors helps avoid costly litigation.
- Infrastructure Maintenance Planning: Proactively scheduling repairs and replacements prevents failures and service disruptions.
- Emergency Preparedness: Planning for natural disasters, cyberattacks, and pandemics minimizes downtime and economic damage.
Beyond reducing risk, CRM fosters collaboration across departments that might not otherwise work together. Because risk assessment involves multiple perspectives, effective CRM is inherently a team effort—often involving village managers, public works, recreation, police and fire departments, and elected officials.
Ultimately, CRM helps towns, villages, and cities identify, assess, and reduce potential threats to public safety, finances, infrastructure, and quality of life. It is not an overly complex system—it simply establishes a logical, transparent, and defensible approach to problem-solving. While local officials may make good decisions without a formal risk management process, those decisions are often less systematic and less easily justified to the public.