Did you know that only around 25% to 40% of operational/business risks are insurable? Whether you have a formal or informal risk management program, effective risk management is essential to operating a successful business in a volatile and uncertain environment. One Minute Risk Manager presenter and Risk Management specialist, Tony Harb, provides five tips to help implement effective risk management in your business.
Size doesn’t matter
No matter what size your business is, managing risks is critical for long term survival. Smaller businesses can use risk management as part of the strategic planning process to help them grow, larger businesses can use risk management to capitalise on opportunities and protect their existing business.
Start small. Start with a SWOT
Understanding your businesses Strengths, Weaknesses, Opportunities and Threats (SWOT) is the perfect starting place for any business to start thinking about and managing risks. The Weaknesses and Threats you identify are effectively risks. But don’t stop there, once you’ve identified the weaknesses and threats, develop formal actions and strategies to address them.
Formalise Risk Management processes
As your business grows, you employ more staff and you increase the number of products, services and clients and so the sources and types of risks will grow. Your risk profile will change.
The SWOT analysis that has served you well in the past will not be good enough now and it will become limited to strategic risks.
At this stage, you will need to develop more formal risk management practices that include, defining your risk appetite, establishing a formal policy and plan, integrating risk management into business processes and developing formal risk assessment documents to proactively evaluate, monitor and report risks. All of these factors will prevent your business encountering a bad case of ‘Risk Blindness’ which can have far reaching and costly consequences; and easily avoided by formalizing a Risk Management Plan.
Remember, risk management is not limited to your ‘risk management’ documents. Your policies, procedures and practices from recruitment, to marketing and service delivery are all risk management enablers. These policies and procedures are controls for risks because they define how things are done, so ensure they are working effectively, are streamlined, automated and most importantly, appropriate to your business.
Maintaining the culture of Risk Management
Once you’ve formalised your organisations Risk Management Plan, it becomes matter of maintaining the momentum and keeping risk management in focus.
Continue reviewing the SWOT, risk registers and focus on improving your processes and controls. Address and learn from small incidents that occur before they grow in size, frequency and impact.
But what about the soft and fuzzy side? What about the Risk Culture?
Risk culture is not separate from the organisational culture. It is simply another dimension whereby, concerns and opportunities about risk taking and risk control activities can be raised openly and discussed. It’s about doing the right thing and ensuring policies are enforced from management down to the shop floor.
Maintaining good Risk Management systems and processes, as well as a strong risk culture is critical for businesses of all sizes. It prevents ‘Risk Blindness’ by ensuring risk taking is within the parameters of your risk appetite, reduces unexpected surprises, protects assets that can’t be insured and keeps you on the path of success.
Should your organisation wish to know more about risk management systems and processes, please contact Tony Harb on 02 92411344 or firstname.lastname@example.org