What could go wrong? Getting answers to this single question could help keep your business afloat. While risks are a norm in the business world, businesses that can overcome them do prosper. Failure is high for startups, with 90% of them never living up to the expectations.
With a risk management plan, it can be easy to identify risks and look for ways to overcome them. The plan also helps you factor in the resources that your business has and how to use them effectively. At the very least, focusing on risk management ensures that all business stakeholders can be happy. Customers can trust your brand, investors can see the yields from their investments, and employees can benefit from a stable income source.
Here are some risk management insights to follow:
Identifying the Risks in Your Business
While some risks might be easy to pinpoint, others will need a little bit of digging. The problem is that you might ignore small risks, only for them to fester. For instance, ignoring the risk that customers are unhappy with your product will come back to haunt your business in the future.
Ideally, understanding your risk landscape starts with creating a list of your business’ risks, and including it in your risk management plan. This includes financial, security, compliance, physical, and market risks. You can start by brainstorming the obvious risks and noting them down. For the less obvious risks, consider doing some market research, approaching experts, researching on past business experiences, and even monitoring your business’ progress.
The Value of Quantifying Risks
Unlike startups, big enterprises may have the luxury of dealing with risks by estimating the liability they expose the business too. For companies trying to gain traction in their industry, quantifying risks is essential. It allows you to have a figure that you can refer to when trying to understand your risk posture. Additionally, it ensures you can use your limited business resources wisely.
Ideally, you should quantify risks concerning the probability of them occurring and the impact they can have on your business. If you want to rank the risks, you can always use a risk matrix. This approach will help know what risks need more attention than the rest.
Pick Your Battles
It might be impossible to eliminate all risks that your business faces. If you try, you might end up hurting certain aspects of it. For instance, trying to mitigate a risk whose solution is too expensive will only leave you ignoring things like employee salaries and customer service. To balance everything out, you need to identify your tolerance for specific risk and identify the best way to treat it.
For risks that are beyond your capacity, you should consider ignoring it. If a risk can be eliminated by working with another business or individual, transfer it to them. This applies for risks that plague tasks like talent acquisition, as you can always outsource them. Ignore risks that will barely make an impact. Lastly, work on any risk that you can eliminate.
Risk Management Is an Ongoing Process
Your risk landscape won’t remain the same. As you grow, you will face new risks. On the other hand, your previously treated risks might evolve, not to mention, the chance that your orientation to these risks might also change.
Monitoring risks is a sure way to keep track of all the risks your business faces. For your risk monitoring strategy to be successful, consider offering the role of monitoring each risk to specific individuals. In case they notice anything amiss, or the risk treatment methods need some updates, they should raise the issue.
Use a Risk Register
A risk register is simply a database about your risk landscape. It outlines the different risks you face, the impact they can have, the probability of them occurring, and how to best deal with them. It also provides information on the date of risk assessment as well as the owner of each risk.
As long as you are using it, tracking the various risks your business faces as well as the best way to mitigate them becomes pretty easy. Ideally, project managers should ensure that it is updated regularly by collaborating with the owners of the different risks. Risk Management Should Be Collaborative
Risk management should be an organizational-wide task.
Working in departmental silos is a sure way to endanger your business. For instance, your business could easily fail to comply with regulations if the IT team fails to collaborate with the HR department. Approaching risk management with a collaborative mindset is wise. Departments should feel free to share information and work together to eliminate threats. Looking for ways to build team chemistry will help create a culture of collaboration in your organization.
Don’t let the small wins your business hide the risks that it faces. The earlier you can deal with such risks, the more viable your business will be. Focus on risk assessment and management to build a sustainable business.