Business Risk Management Plan
Making a business successful requires hard work and extensive planning. Part of the process is coming up with a business risk management plan that will help steer the business around potential problems
What is Business Risk Management?
Business risk management is a subset of risk management that focuses on risks to business operations, systems, and processes. Identifying, prioritizing, and addressing risks will help you to minimize unforeseen incidents and penalties and keep your business on course.
Risk Management
The goal of business risk management is to detail what kinds of risks exist in your specific business and figure out how to prevent them entirely or minimize their impact on the business as a whole. To do this, most risk managers take a five step approach. First, identify the risks involved in all aspects of the business. Second, review the probability of the negative events occurring. Third, come up with a plan, a way to decrease the risk. Fourth, put the plan into action. Last, monitor the situation to see if the plan is effective or if it needs to be altered.
Kinds of Risk
When many people think of risk management, they think of events that need to be insured against, things like fires, floods, and accidents in the workplace. These kinds of events are important in business risk management, but they are not the only kinds of risks that need to be considered when managing risk. Risk management includes risks that are a part of the industry the business is in and the way in which it does business. Because of this, business risk management is a way of codifying the way decisions are made and guiding those decisions are made in the future.
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Financial Risks
Most businesses take risks with their financial assets on a regular basis. Choosing the wrong supplier or distributor can backfire when the supplies needed to make a product don’t arrive on time or the distributor goes out of business, stranding the products with no way to move them. Relationships with clients also can be risky, especially if a company comes to rely on one too much. A business risk management process or plan should cover these kinds of risks and how decisions should be made. In other words, it should say how much risk is too much in a financial relationship.
Employee Risks
While these may include physical risks, business risk management should also take into account how to prevent theft, fraud, and other crimes by employees. Another risk to a business caused by employees is simple human error, where even a tiny mistake in entering data or in the manufacturing process can have huge and sometimes devastating consequences. Risk management should include a quality control process for data input and production to minimize the impact of employee errors.
Benefits of Business Risk Management
Having a risk management plan in place not only can help in the event of an emergency, it can also help guide the way the company does business. It will help to organize the allocation of resources and capital by helping to regularize the way that priorities are set. This will help with decision-making and planning, as well. Since risk management requires the anticipation of potential problems, it can help the business prevent a disaster or at least prevent a disaster that happens from having too severe an impact on finances and other assets.
There are many areas of a company that benefit from business risk management, and not just those that deal with safety and disaster planning. Make sure that your business has a plan for dealing with all of its risks!