Why Risk Management Is So Important For Your BusinessJason Siddall
Risk management. It’s not sexy. However, as with many un-sexy things, it’s very, very necessary. Running a business is, by its very nature, risky. Most businesses are, in fact, founded on a certain degree of risk. These types of risks are, however, usually calculated. Others, though, have the potential to either completely destroy a business, or cause significant damage that is both time-consuming and expensive to repair. It’s not always possible to eliminate these risks, but it is possible to manage them. With proper risk management systems in place, well-prepared businesses can minimise lost time, money and productivity.
So, what do we mean when we talk about risk management? Essentially, it’s the practice of identifying, assessing and controlling threats to your company’s capital and earnings. Your business faces many potential threats or risks. These include accidents and natural disasters, security threats and risks related to data, strategic management errors and legal liabilities, among many others. Increasing digitisation means you’re particularly vulnerable to hacking, and the theft of your clients’ personal information and intellectual property. Data-related strategies to manage this risk have become a number one priority for many businesses. It’s something you need to think about too.
Risk Management: Identifying Risk
There are many methods for Identifying risk, but most involve breaking down threats into external, strategic and preventable categories, and deciding how best they can be managed – either through elimination, reduction, acceptance or transfer.
According to the 2018 Allianz Risk Barometer, the top threat to South African businesses are cyber-related incidents. This is closely followed by business interruption and changes in legislation or regulation. Physical risks, such as climate change and the increasing volatility of the weather, and loss of reputation or brand value, round out the top five. Fires and explosions, which are the most common cause of damage to buildings, came in at number six.
Physical risks also include accidents or spills involving hazardous materials. Toxic fumes, dust and filings, acid, gas and poisonous liquids are among the materials most commonly spilled or released at the workplace.
Different Types Of Risks
Understanding the different types of risks your business could face is critical to help you identify them. This in turn then helps you manage them. Some of the main types of risks you’re likely to encounter include:
These risks arise from unexpected or unknown events, such as the loss of a critical supplier, or a natural disaster. Uncertainty-based risks are, by their nature, unpredictable and hard to control. They are, however, possible to manage by having a well-structured emergency management plan in place and doing regular checks on the financial health of your business, among others.
This type of risk arises when we choose one option or opportunity over another. When you commit resources to one opportunity, you risk missing out on a better one, or not getting the results you were hoping for. Opportunity-based risks include buying a new property, launching a new product or service and relocating your business.
These arise mainly from dangerous workplace situations, including high noise levels, faulty equipment, chemical and biological hazards, ergonomic challenges and psychological issues.
No Risk, No Reward
This is an old adage, but it is still highly relevant for most companies in operation today. Risks may sound scary, and it is probably intuitive for most business owners to avoid it wherever possible. However, this isn’t usually possible, nor is it always desirable. It’s all about how fully you understand the risks to which your business is exposed, and how willing you are to accept a certain amount of risk in order to achieve your objectives. In other words, what is your risk appetite?
When risk is properly managed, you can take advantage of opportunities and give yourself a competitive edge in a difficult market. At Strategic Asset Management Solutions, we help you protect your strategic assets, people and business data. We work with you to formulate a risk management strategy based on your appetite for risk. Together, we decide whether to tolerate or mitigate risk and how to do both.
We offer a wide range of services and solutions from project management and Internet Of Things to access control, closed circuit television and fire suppression systems. We do risk so you can do business. Contact us today.