When you have poured so much of your time and energy into your business, you may not want to look at the possible weak points. However, it’s an important exercise so you can implement a risk management strategy.
Risk management is the method in which a business prepares itself for events that could impact operations or cause it to lose money. This could be the likes of natural disasters, theft of equipment or injuries to staff and customers. It could also be looking at the resources in the company and if they align with the industry needs. One such example is of Furnasman Right Time, who do not have any major competitors across their industry, and therefore need to keep a track of all major projects, competitors and threats that may arise at any given time.
Here’s why every type of business should consider implementing a risk management strategy.
Why is Risk Management Important?
As already discussed, a risk management plan is there to protect your business. Some of the benefits of having one in place include:
- ensuring a safe and secure environment for everyone on your premises, including staff, customers and visitors
- better stability for your operations
- preventing wasted resources
- protecting your assets
- protecting your business’s reputation
- reducing legal liability
- clearly defining your insurance needs
As you can see, it makes good business sense to identify the risks to your business and make plans to protect it. So, how would you go about doing this?
Identifying the Risks
In order to have an effective risk management strategy, you have to identify potential risks and problems before they happen and put procedures in place to minimize their impact or avoid the risk altogether.
As a business owner, it’s up to you to make a realistic evaluation of any risks and then plan accordingly. Your strategy doesn’t have to be complex and time-consuming; it could be a simple process where identity what has the potential to go wrong, the level of risk it poses to your operations, what you would do to control the risk or recover losses, and also how your business will pay if something goes wrong.
Let’s focus on a specific industry to use as an example. Potential risks in a motor vehicle business could include theft of equipment, which could prevent your mechanics from carrying out their jobs and therefore losing valuable income. Other risks include staff injuries from handling heavy objects, moving cars and coming into contact with cleaning chemicals when valeting a car, or staff and customer injuries from slipping on spillages.
Protecting the Future of Your Business
So, you know your business needs a risk management strategy. But what happens after you’ve recognized the potential risks and threats?
At the top level as a business owner, you should ensure you have appropriate insurance cover in place. To continue with the motor vehicle business example, your motor trade insurance should cover you and protect your business for all of the relevant areas you have identified as risks.
Importantly, everyone in the business must be aware of the risks and how to handle them, even those in your supply chain. This means clearly defined policies, procedures, roles and responsibilities that should be communicated to all staff. In addition, the correct tools and resources should be available so they can deal with the possible problems and you should ensure that ongoing training, testing and monitoring is in place too.
To guarantee the ongoing success of your business, make sure you plan ahead. With a risk management strategy in place, you’re not only protecting the future of your business but also all of your employees, customers and business partners.