Hello!
There are risks in everything we do, whether when we cross the road, how much we invest or make dietary choices. We can’t avoid risks, but we can mitigate its impact. The same thing goes for businesses. Companies face risk all the time.
When talking about risks in the corporate world, this refers to one or more unforeseen events that may affect the organization’s ability to achieve its objectives.
This could range from disruptions in the market, natural calamities, pandemics, changes in the company’s senior leadership, etc.
Risks differ in terms of severity and how much it can impact a company, which is why risk management should be an integral part of an organization’s strategy.
With efficient risk management, an organization can define and execute strategies that aim to prevent or reduce the company’s risks so that the business can continue to run smoothly.
Here are five things that you should do to improve risk management at work.
1. Identify Risks Early
Many risks can impact your organization, which is why it is critical to include risk management at the start of every project or task.
Since you can’t predict what might happen in the future, strategic risk management helps you detect threats early on so that you can respond accordingly. Your risk management plan should be unique and tailored for your organization’s particular needs and challenges.
“The best way to manage risk is to attempt to spot it and plan accordingly before it happens”, according to David Rowland, head of marketing at Engage EHS.
This is why risk assessment software is now so important to a business. Using this software, you can make plans, spot potential risks, and then do everything you can to minimize their impact.
Part of your risk management plan should include identifying various risks that can affect your business, whether it’s a legal risk, environmental, regulatory, etc. Make sure to track Early Warning Indicators (EWIs) of the different risks that you might face.
If you know what risks your company may be facing, you can prepare action plans for the corresponding risk scenarios. Ensure that risk management is a priority for all employees and that it is a part of all your work processes and corporate culture.
2. Analyze and Describe Risks
Once you have identified a risk, proceed to analyze and determine the scope of the risk. Your risk assessment process should also include distinguishing between the cause and effect of the risk. You must understand the link between the risk and the organization.
Utilize a risk matrix to assess and prioritize all known risks. You should prioritize your risks based on the probability or how likely they are to occur and how much they can impact your business operations. Some risks can be just minor inconveniences, while there are risks that can threaten business continuity.
While many risks can affect organizations. Do not think that risks are the same for all.
Organizations have different situations and capabilities in terms of managing risks, so you need to understand how risks specifically affect your business.
3. Use Appropriate Strategies to Manage Risk
Use the 4Ts model to decide on how you should manage risks:
- Transferring risk –
Assign an individual, group, or third party to be responsible for managing the impact of the risk.
- Tolerating risk –
No action is taken to mitigate or reduce risk; however, the risk should still be monitored. This may be because the probability and impact of the risk are low.
- Treating risk –
Control risk through actions that reduce the likelihood of the risk occurring or minimize its impact before it happens.
- Terminating risk –
Alter processes or practices to eliminate risk completely
4. Document All Risks in a Risk Register
Make sure to capture all risks that your company faces so that you can see a complete picture of your entire organization’s risk exposure. It is critical that you document all the risks that your organization may be facing.
If you have efficient documentation of risks, you will improve the sharing of information and enforce a sense of accountability among members of your organization. Remember to document who is responsible for what and appoint a risk owner too.
Documenting your risks is a good corporate practice and will be beneficial should you need historical data for future reference. You can analyze past mistakes and develop more effective solutions should there be a similar risk in the future.
5. Monitor and Review
The level of risks that your company is facing is constantly changing. New risks can emerge, while others become less critical.
Make sure to regularly monitor your risk exposure so that you will be ready to take action should the need arise. If you regularly monitor your risks, you can prevent these risks from becoming a crisis for your organization.
Having a risk management process in place is a smart move for any organization that values the importance of being prepared. Not only senior management and members of the risk management team must be conscious of the company’s risk exposure.
You should also train your staff to be aware of potential risks so that they know what to look out for and how they can contribute towards risk management.
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