When you are in a management position, you can’t guess and estimate the risks and dangers of your business. When the company needs you, you need certainty.
Learning business risk management is not as grueling as it may appear. It can boil down to a 3 step process.
How does this process work? Today we can show you a quick look at how you can master business risk management.
Identify Potential Risks
The first step requires you to identify the potential risks you may face. There can come in a lot of different forms, so we will go over the risk types.
The biggest thing to remember with this step is that risks come in all different sizes and you can’t ignore any of them. Tiny risks may be easy to fix, but if ignored, they can turn into major issues. Complacency does not help you.
Physical risks are the problems that can come up in the workplace itself. This can items like environmental hazards and employee issues.
1. Location Risks
Your workplace, whether it is a factory or office, needs to meet all the safety standards. Following safety regulations help to cover a lot of these risks.
Things like hazardous materials, the region’s risk of natural disasters, and fire safety are some of the more common ones.
Even a building’s remoteness can affect the emergency service’s ability to arrive on time.
2. Human Risks
Most employee risks come from negligence and illegal activities like embezzlement, theft, and fraud. Most of these you can screen out in thorough interviews and routine performance inspections.
3. Technology Risks
Technology can be fickle. That much electricity can cause hazards and losing power can erase productivity.
The more computers and other devices you have operating in one location, the more you must protect and look them over.
Strategic and Financial Risks
Strategic and financial risks are the most uncertain of risks. The biggest reason why is that not all of these risks are bad and most of them are a natural part of the business.
By definition, all investments are a risk. Research and development is a strategic risk. Banks lending money count as a financial risk. The key here is that without these, these businesses lose out on a lot of potential business.
Assess the Risk
Once you have seen the risks that can come up to your company, you need to move to step 2 and assess these risks.
Even the slimmest of dangers needed assessment, to ensure that the danger is slim and not unmanaged.
Your assessment should lead right into the final step and showcase how much each risk needs your focus. This includes how much danger the risk poses to assets, how much money is on the line if the risk happens, and what you can do.
Find a Solution
Step 3 is what you can do with each risk. This step requires you to find the most efficient and viable solution to each problem. As each risk can be different, you need to go off of the assessment from step 2 to evaluate each solution.
For most physical risks, safety procedures and localized management is the best overall solution. Most of the time there are enough warning signs to catch problems in these areas before they happen.
For strategic and financial risks, the strongest defense can be in risk mitigation. This can come in financial safety nets for when investments do not pan out.
Captive insurance is a great example of good risk mitigation.
Business Risk Management Managed
Mastering business risk management comes easier with this 3 step process. To get the handle on the system, though, requires a lot of experience and trial and error.
For more financial guidance and information, we here at The Free Financial Advisor are eager to help! Check out our other articles today!