Seven Steps To Better Risk Management

Seven Steps To Better Risk Management

Risk is a vital and inherent part of life and an accepted aspect of most, if not all, business activity. But as the business environment gets more complex, with new hazards surfacing all the time, knowing what counts as an acceptable degree of risk is one of the most fundamental aspects of good business decision-making. So what are the essential steps to effective risk management?

1. Accept

It’s almost impossible to do business without taking some risk. Indeed, many would argue that the rewards generated by a business are the rewards for that risk-taking. Total risk aversion will prevent growth and limit your opportunities. The key is to decide which risks to accept, and, having accepted them, to agree on the best ways to lessen their impact.

2. Recognise

In order to make sense of the risks a company faces, it’s essential to get business owners and senior managers to recognise the importance of risk management and measurement. Senior-level recognition of this as a vital issue helps to create a culture of awareness throughout the whole organisation. This in turn nurtures a set of values that ensure the correct checks and balances are in place so that all staff are aware of the part they have to play in building a safe and successful business. Keeping all staff – from the boardroom to the shop floor – informed of the need to be vigilant goes towards building the most effective protection.

3. Identify

Getting senior staff thinking about key risks creates a detailed and accurate picture of the actual and potential liabilities facing a business. While there’s no need to scare employees, it’s important that any risk register represents a full and frank assessment of threats to the business and its employees. These risks range from over-reliance on a single customer to the impact of industrial action or the increasingly likely event of a cyber attack. While all businesses are different, there are similarities and patterns according to sector, geography and business size.

“Keeping all staff informed of the need to be vigilant goes towards building the most effective protection”

4. Assign ownership

Having identified most, if not all, of the potential risks facing your business (as well as the probability and impact of each), assign responsibility and ownership for monitoring them. Depending on the seriousness of any potential fallout, this might amount to quarterly or annual reporting from a trusted but relatively junior source, or it might demand a weekly update from a senior director. Allocate responsibilities according to the seriousness of the threat and the likely impact on the business.

5. Report incidents

Deciding which incidents (or near misses) merit reporting is a matter of balancing the need for information with the possibility of reporting for the sake of it. While you want to capture all potentially useful details, this can sometimes lead to information overload. Besides capturing any incidents or relevant activity – however minor they may appear – think also about capturing near misses. They can indicate a build-up of potential future threats. While these events present no risk to the business in isolation, the combined total of them might have an adverse effect in future – therefore, they need to be captured.

6. Monitor and measure

Having a reliable record of all potential risk factors and any negative events is only useful if that information is used by the business. This information needs to be actively checked against the risk register, so that the risk-management process becomes embedded in the business and is at the heart of all operations. It is also the best way to track trends and spot potential patterns in the market. This may help identify dangers before they get too serious.

7. Improve

While there’s considerable merit in doing all of the above just to keep up to date with the risks you’re facing, this process is most valuable if it’s used as a basis for continuous learning across all areas of a business. Improvements large or small to operating models and business plans can be informed by continually monitoring risks and improving processes to make sure such risks are minimised.

MentorLive’s risk support

The MentorLive online risk register helps business owners manage the risk-assessment process, providing helpful examples from across a range of sectors, along with guidance notes that take owners step by step through their obligations. It also helps business owners complete technically demanding risk assessments, such as noise risk assessment.

Mentor consultant Darren Heather explains: “A good understanding of the risks facing a business is becoming more important as the operating environment becomes increasingly complex. Good risk management is undervalued by many businesses. In the area of health and safety, for example, a clear risk management plan can help with CHAS accreditation and other similar standards.”

 

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Sunday, 18 November 2018
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