Whilst the business grows and the company is fueled by optimism and excitement, the huge danger of all is arguably not having a strategy in place for unforeseen events and conditions resulting the unexpected losses that the business cannot bear. This is what we call ‘risk’.
The core of risk management is identifying these risks and taking preventative measures. The objective is to make sure the business acts quickly to reduce potential losses.
On a positive note, risk management also assists businesses in determining which risks are necessary to boost their chances of success. In other words, you have time to determine whether to slow down or drive around the bumps in the road if you can see them up ahead, and continue a long-term run.
With a clear understanding of the level of risk the company is willing to take, a road map to help them avoid pitfalls, and increased workplace security, safety, and compliance; they can make more educated business decisions.
Well-laid risk management would help to:
1. Reduces legal obligations. You can prevent losses and collateral damage if a plan is in place and the appropriate individuals are aware of how to execute it.
2. Safeguards assets and people against potential danger. Build a security layer around your assets and premises, and reduce the chance of fraud.
3. Ensures that the business is suitably insured. A clearer view of the business insurance landscape is provided by knowing which dangers are more likely to materialize.
4. Demonstrate Corporate social responsibility. Implementing a well-thought-out mitigation strategy in the case of a potentially harmful occurrence to the environment demonstrates concern for the environment and reduces damage.
The financial crisis in 2008 and most recently COVID-19 have taught the entire corporate world a bitter lesson. So bitter that they can’t forget it for years to come. Hence it is not a surprise that businesses have started investing in their risk management practices, which is a positive sign.
