Risk management isn’t just a buzz word, nor is it something only big
businesses need. Risk management should be part of every
organization’s ongoing business planning process.
Why? Because businesses are now exposed to many more risks
than in the past in the form of legal risk, technology risk and
economic risk, to name but a few. Understanding the potential
impact these perils have on your business is a necessity in today’s
business environment.
What do we mean by ‘risk’ here? Risk is the chance that an action
or event will adversely impact your business. Risk management is a
systematic process you put in place to help minimize the
consequences of any adverse event. It’s a way of identifying,
analyzing, monitoring and managing activities or occurrences that
have the potential to damage your operations.
It’s important to develop a concrete risk management process as
part of your business’s day-to-day operations. This usually starts with
your business plan. Most business plans contain a SWOT (strengths,
weaknesses, opportunities and threats) analysis.
This identifies risk and is the first step in any risk management
framework. Once you have identified your risk you can develop a risk
profile, which outlines potential risks to which your business is
exposed. Businesses can’t completely eliminate risk – for example,
it’s impossible to completely avoid IT risk. But what you can do is
work out which risks you are prepared to expose your business to,
and what you can do if these dangers become reality.
This is why managers need to work out the risk tolerance zone or
the extent to which the business is prepared to be exposed to danger.
When you know your potential risks, you can start developing risk
minimization strategies. This might involve things like ensuring you
have strong firewalls in place to reduce the chance of your computers
being exposed to viruses and hackers.
It might also include ensuring you have the right insurance cover
if, for example, your business was destroyed by fire. A written action
plan including a timetable of activities that will help reduce risk is
usually part of a risk minimization strategy.
Developing a culture that encourages team members to report
potential business risks also goes a long way in helping to reduce risk.
Make sure you nominate someone to be the champion of the risk
management process and encourage other team members to go to
this person if they believe the company is at risk in any way. Also put
in place clear reporting frameworks so that your risk management
system is clearly documented.
Bogged down in the day-to-day, it’s easy for small business owners
to ignore risk management. But this is a false economy.
In reality, most businesses can’t afford NOT to have a risk
management strategy. For advice on assessing your real risk areas
and your exposure to damage and loss of earnings if things go
wrong, ask about our risk assessment and prevention services.
businesses need. Risk management should be part of every
organization’s ongoing business planning process.
Why? Because businesses are now exposed to many more risks
than in the past in the form of legal risk, technology risk and
economic risk, to name but a few. Understanding the potential
impact these perils have on your business is a necessity in today’s
business environment.
What do we mean by ‘risk’ here? Risk is the chance that an action
or event will adversely impact your business. Risk management is a
systematic process you put in place to help minimize the
consequences of any adverse event. It’s a way of identifying,
analyzing, monitoring and managing activities or occurrences that
have the potential to damage your operations.
It’s important to develop a concrete risk management process as
part of your business’s day-to-day operations. This usually starts with
your business plan. Most business plans contain a SWOT (strengths,
weaknesses, opportunities and threats) analysis.
This identifies risk and is the first step in any risk management
framework. Once you have identified your risk you can develop a risk
profile, which outlines potential risks to which your business is
exposed. Businesses can’t completely eliminate risk – for example,
it’s impossible to completely avoid IT risk. But what you can do is
work out which risks you are prepared to expose your business to,
and what you can do if these dangers become reality.
This is why managers need to work out the risk tolerance zone or
the extent to which the business is prepared to be exposed to danger.
When you know your potential risks, you can start developing risk
minimization strategies. This might involve things like ensuring you
have strong firewalls in place to reduce the chance of your computers
being exposed to viruses and hackers.
It might also include ensuring you have the right insurance cover
if, for example, your business was destroyed by fire. A written action
plan including a timetable of activities that will help reduce risk is
usually part of a risk minimization strategy.
Developing a culture that encourages team members to report
potential business risks also goes a long way in helping to reduce risk.
Make sure you nominate someone to be the champion of the risk
management process and encourage other team members to go to
this person if they believe the company is at risk in any way. Also put
in place clear reporting frameworks so that your risk management
system is clearly documented.
Bogged down in the day-to-day, it’s easy for small business owners
to ignore risk management. But this is a false economy.
In reality, most businesses can’t afford NOT to have a risk
management strategy. For advice on assessing your real risk areas
and your exposure to damage and loss of earnings if things go
wrong, ask about our risk assessment and prevention services.
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