In today’s competitive business landscape, every organisation needs to consider risk management as a strategic function. Strategic risk management can help your business to continually become stronger and more resistant to risk, find efficiencies and reduce cost. Before we learn about the process, however, let’s define risk management.
What is Risk Management?
According to Southern Cross University, risk management is “the systematic application of management policies, procedures and practices to the tasks of establishing the context, identifying, analysing, assessing, treating, monitoring and communicating.”
Regardless of your size, your industry or your aptitude of employees, there are always chances that something will happen in your business to negatively impact your objectives. Wouldn’t it be great if you could minimise the risks? You can.
What is the Risk Management Process?
The process of developing a risk management strategy works best when it’s undertaken by a group of people instead of a single person, especially when each member of the group has a firm understanding of the organisation’s overall objectives. Let’s take a look at the steps toward effective risk management.
Identifying Your Unique Risks
Using your core objectives as a framework, consider what risks you might face that would prevent you from reaching your goals. Risks vary from industry to industry and from organisation to organisation. Some risks could include delays in the delivery of supplies, IT problems, the loss of key employees, or the failure to secure loans. In this stage of the risk management process, document a comprehensive list of potential risks facing your business.
With your list of potential risks, you’re ready to identify causes. What might cause some of these risks to materialise? For instance, your materials could be delayed due to unreliable suppliers, or you could lose key employees who are being underpaid for their current skills and positions.
Once you’ve identified the causes of your risks, you can evaluate your controls. Is there anything you can do about the reliability of your suppliers? Perhaps it’s time to look for alternative suppliers in case you have an emergency. As for losing key employees, perhaps you can improve working conditions or offer monetary incentives to employees who have proven especially valuable to your organisation. Identify controls for every risk where possible.
Evaluate Risk Likelihood
Which risks are the most likely to turn into problems for your business? And which risks would have the greatest impact on your organisation? For instance, failure to securing capital financing would probably be more problematic than a one-day IT network outage.
By figuring out the likelihood and consequence descriptors of your risk factors, you can prioritise your efforts to reduce risk.
Make Decisions & Monitor
With all of this information at the ready, key decision makers in your organisation are ready to decide how to allocate resources to minimising the most pressing risks you’re facing. Some risks are easier to control than others. Some risks must simply be monitored and reviewed from time to time. That’s why it’s important to review the risk management process on a regular basis.
How Can Your Business Be Strategic in Managing Risk?
Your business can be strategic in managing risk when you keep the following items in mind:
Risks are interrelated, and recognition of correlations can help you to more effectively manage risk.
Risk must be reassessed regularly since conditions, parties, and geopolitical situations change.
Measurement and valuation depend on accurate numbers.
Risks can encompass the following areas: market, credit, legal, regulatory, operational, strategic, political, reputational, and more.
Risk management requires resources and considerable expertise.
Effective risk management can create culture of safety within your organisation.
Use Risk Management Software
One of the most strategic ways to approach risk management is to use software designed specifically for this task. Our risk management software helps you to document new process and risk events in real time, manage both site and project risks with multiple risk assessments, and use comprehensive reports to improve decision making within your organisation.
Learn more about what risk management software can do for your business. Contact us at Vault, or sign up for a free trial to experience it for yourself.
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