They say, “Risk is an inherent part of being in business”. However, accepting risk as a part of your business is not a solution.
Here comes a business risk management plan to the rescue that significantly cuts down on unexpected project risks.
According to research, a well-thought risk management plan can decrease risks encountered by as much as 90 percent. And, if you are creating a risk management plan in Australia than a good risk management process is essential in diminishing unexpected project risks.
Understand Why Risk Management Is Important
An efficient risk management plan will help your business continue in operation.
Reduced risk leads to better cash flow and higher stability. Creditors will see this stability and good cash flow reflected in your company’s financial reports.
Higher stability will mean your company will have better scope of success in future.
The rewards of risk management are all linked together: good cash flow leads to stability, which leads to good credit, which leads to longevity.
To create a plan that’s tailored for your business, start with these steps:
An efficient risk management plan should identify and address potential risks. These plans don’t have to be costly or very time consuming. The risk management process can be as easy as answering the following few questions:
- Risk identification– What can go wrong at your workplace or from the particular segment you are working on?
- Risk analysis– How will it affect your organization and operations? Is it high or low?
- Risk control– What should be done in order to prevent the loss from occurring or to recover.
- Risk Monitor– If something does happen, how will you rectify it?
Although risk management planning is all about identifying, assessing, analyzing and monitoring and finally reducing the effect of risks on business, the benefits received through the implementation process can be quite substantial. Such benefits include:
- Discovering different risk blind spots – Identifying factors that are directly or indirectly affecting your business from performing at its best capacity.
- Observing activities that are not adhered to OHS standards and also can cause harm to you and your employees.
- Noticing practices that aren’t completely wrong, but that could be improved for better results and to reduce the risk of poor aftermaths.
- Assisting in identifying areas where costs could be controlled.
- Making you aware of potential risks you may not have considered and implementing a plan of action should they occur.
- Determining the steps the business would take in the case of a sudden event where the potential for widespread impact is high (for example, in the case of a natural disaster).
- Ensuring your business is financially equipped to withstand the impact of a whole range of different risks.
- Having an easily accessible plan to look to in the event of a whole range of different risks so you and your employees are not confused about how to handle a situation — ensuring a cohesive approach.
Without a risk management plan in place, the risk management assessment challenges every business would face could be far more significant and your business’s ability to handle such damage could be negatively impacted.
As always, planning is primary to bring your business to success, so when it comes to risk, you need brilliant risk analysis tools in place for handling such risk and determining the success or failure of your business when the worst happens.
7 Steps to Manage Risks
Setting up a risk management program can be daunting. For that reason, we’ve split up the steps into 7 easy areas that you can work through at your own pace, which you can also see illustrated in the infographic below.
- While you ‘Set the scope & rules’, you will know what entities are involved and what the organization’s risk appetite is.
- ‘Identifying your legal domains’ will help you focus on agreements, dues/claims and/or assets?
- Knowing who will be impacted by the risk such as what departments and employees help you ‘involve the organization’
- Define the risks, their causes and consequences once you ‘collect relevant data & identify risks ‘.
- To know the likelihood or impact of each risk type, ‘assessing the risks’ in advance is crucial.
- Reducing, avoiding, controlling or transferring risks is possible when you will ‘Implement controls & mitigation’.
- Explore, review and report results – Are your risk treatments working? What is the return?
For more details about each step on how to increase your growth potential, including identifying, assessing and managing risks, get your business plan management software such as Business Propel that excels in monitoring and managing your progress at every step.
They will help you setup your business with SMART (SMART, MEASURABLE, ACHIEVABLE, REALISTIC, TIMELY) objectives without:
- Spending unnecessary time clarifying what you want to achieve or
- Knowing clearly how you will know you have achieved it.
So, rather than learning from planning and experimenting on your own, having professionals by your side will help you save your valued time and explore better business opportunities.