In business, risk can often mean an experience which results in a loss of profit. This could be for a number of reasons, but is usually influenced by reduced sales, increased costs, losing business to competitors, uncertainty in financial markets and laws/regulations. Non-business factors can also be involved such as natural disasters or employee injury.
Risk is often viewed in a negative light, signalling that you might not get what you want out of a situation. Sometimes when you mention a particular risk being associated with a proposed project the chances of it going ahead may be lessened. But risk doesn't have to be a negative if you know how to use it.
With such a wide variety of risk sources and causes, it can sometimes be difficult to see how to turn potential issues into benefits. The secret is successful risk management. By spotting risks and being able to address them, in a timely and effective manner, you'll be able to benefit from them.
Your first step is to identify potential risks. You'll want to look at your entire business and your supply chain too.
Look at environmental, reputational and monetary risks from your business activities or regulations that your organisation must adhere to.
You should also consider risk in areas that may affect employees, customers, partners or suppliers.
Decide how likely the risk is to occur, how frequently it could occur and how much of an affect it with have. This is known as Risk Assessment. It will help you to decide how or even if you should take steps to counter the risk.
By categorising risks you are able to assign a priority to them. Low frequency, minor effect risks would be prioritised lower than those with a high frequency and significant effect.
You have four options when considering how to address risk: treat, tolerate, transfer or terminate.
- Treat - deal with the immediate issues caused by the risk as soon as it occurs.
- Tolerate - acknowledge that the risk will occur and choose to accept it.
- Transfer - get someone outside of your company to address the risk, this can also mean the act of purchasing insurance.
- Terminate - take action to prevent the risk from occurring in the first place.
Document your risks and your treatment plans, making these available to your staff. By making sure that everyone in your business is aware of how to handle any risks that occur you will find that risks will be managed more efficiently and any new risks that arise will be identified before they can have an adverse affect.
Publish details of your risk management strategy externally to increase your reputation with customers and supply chain partners. Knowing that a business has planned for any eventuality reassures those working with the organisation that, should the worst happen, the effects upon them will be minimal.
Identifying and addressing risks will prove that you are forward-thinking organisation that is committed to continual improvement.
For businesses looking to take their risk management to the next level, it is worth considering the ISO 31000 - Risk Management and ISO 22301 - Business Continuity Management System Standards. These internationally-recognised Standards are used worldwide by organisations wishing to ensure they can respond to and recover from risk, with minimal down time or disruption to services.
To find out more about ISO 31001 or ISO 22301, please speak to one of our Certification Development Consultants by calling 0333 344 3646 or emailing firstname.lastname@example.org.