Risk management is important for every business. Every business will face risks that could affect their success. Often the approach of an entrepreneur is to get things done quickly. A Quick Start approach. This can mean that some risks are overlooked until they rear their ugly heads. What is needed is a balanced approach that gives time to evaluate risk. For those interested in a detailed understanding of risk and its management click on this LINK. A study by CASS business school looks at the implications of not managing risk in business. Click this LINK to see the full report.
So what is risk? Risk is the probability of something happening and its related consequences. Once a risk is identified the consequences should to be evaluated and quantified. Effective risk management is an ongoing process and is at the heart of strategic thinking. A quarterly review of your risk register by senior leaders and managers is a good place to start. A risk register is simply a document that contains all your risks. It’s a good idea to rank your risks in order of importance and urgency.
Business risk can be categorised in the following headings. These headings can be sub categorised depending on what is appropriate for your business.
It’s essential to do some stakeholder analysis. Identify their interests and control over your business. A simple way to identify risks is to ask the “What if” question. E.g. what if climate change affected my business? What would be the impact? Can I do anything to manage this particular risk?
Once you have identified risk it is useful to rank them in order of priority. Deal with them in terms of being urgent and important. There are now four things that you can do.
The above is a basic summary. The links above give more detail that will help you create a risk management process for your business. Contact us if you would like one of our part time FD’s to help you assess your risks and create a risk management process.
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