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What is Risk Management and How Can My Business Implement It?

Risk management is something that every business needs to be aware of in order to be a success.

There are risks in every aspect of life, but for businesses they can have an incredibly serious and potentially crippling effect if not prepared for and dealt with properly.

Risks come in many different shapes and sizes, some which can be adequately prepared for and others where it is simply a case of damage limitation. Our TNT solutions provide some help for guarding against certain risks to your company, but a lot of the onus will be on the risk management strategies your business itself implements.

The Importance of Risk Management

Businesses need to take risks in order to grow and evolve quickly. Threats must be minimised for the potential to be realised, which is where business risk management comes into play. Being aware of any potential risks and having a plan in place to deal with them should the worst happen will help the company recover quickly.

It can also help form the peace of mind for investors, the board, clients and those higher up, by ensuring that there is a plan to deal with any such disasters. There are also legal obligations involved, such as providing a safe workplace for employees through guarding against any risks that could crop up.

Plan for a Crisis

Every business must plan for a crisis that could affect them, through implementing strong risk management strategies. Depending on the sector your company is based in, the type of potential crises that can hit will vary, but some common ones to prepare for include:

  • Equipment theft
  • IT systems failure
  • Fire/flood/natural disaster damage
  • Staff illness
  • Loss of important data

Some of these risks can be guarded against by forward planning, some through a well thought out risk management plan, and others can be down to just plain bad luck. All of these and more are very real risks to most businesses though.  

Build a Risk Management Plan

Set up a risk management plan for your business to reduce the impact any risks will have on the working day-to-day life. A certain amount of budget, resource and worker hours will need to go towards this, but it will be more than worth it compared to the financial cost any risks not being dealt with will have. Here’s how to manage risk in your business.

Identify Risks

Firstly, you will need to identify any potential risks that could affect your business. Think as far as you can, aside from the obvious ones of theft and fire. Taking a look at the company business plan and working out what you wouldn’t be able to function without presents some risks. Ask around in each department to find out what would be seriously detrimental to their working environment and put it down as a potential risk.

Evaluate Potential Risk Impact

Once a list of risks has been compiled, the potential impact they will have on your company should be calculated. The likelihood of each one and its severity will determine the level of risk, and can help work out an average financial cost, should the risk occur. The evaluation must include:

  • The likelihood of the risk
  • Its importance to business activity
  • Potential financial losses to the company
  • Control over such risks

Risk Treatment

The risk evaluation will help determine how and when they should be treated. For example, the least severe risks can probably be postponed, while more serious ones will need to be dealt with immediately. A method of treatment, who will be involved, along with costs and the likeliness of success should all be factored into this. In some cases, avoiding an action could be the best course to avoid risk, while for others quality control will help minimise it.

Update Risk Management Plan

Once you have come up with a list of potential risks, their evaluation and treatments, should they occur, the business risk management plan can be updated. There are various strategies for testing a risk management plan that should be used before fully updating it. The risk management plan will make up part of your business continuity plan, which should be regularly updated.

Implement such risk management strategies to ensure your company is well prepared for any troubles it may run into.