Risk management is all about planning for things that could go wrong in your business. It’s essential in ensuring that your business will be around for a long time. After all, most businesses don’t last more than three to five years because they don’t properly plan for the issues that arise. Here are five basic tenets of organizational risk management to help your business stay profitable.
Identify Business Risks and Set Priorities
As a business owner, you need to spend time pondering situations that could damage your business. Identifying potential risks is the foundation of risk management. These can include anything from possible product recalls and lawsuits to server failures and theft. After you’ve identified the risks, you need to set priorities for addressing each one. Risk management is time consuming, but it’s essential to the health of your business. A consulting firm can be helpful in navigating this sometimes complicated process.
Create a Plan to Mitigate Your Business Risks
Once you have identified as many potential risks as you can, create a plan for what to do if one of these risks manifests itself as a problem. Your plan should include first steps to take in the event of a problem, as well as preventative measures. Make your risk management plans as detailed and straightforward as possible. If you don’t know where to get started, turn to a firm like Ruota Consulting for experienced advice.
Buy Insurance to Limit Liability
Businesses need good insurance as part of their risk management plans, and there is insurance available for practically any situation that could arise in your business. You should be prepared for possible injuries with liability insurance, and financial loss insurance and property insurance are also helpful for dealing with robberies and other problems that businesses sometimes face. Insurance is not a cure all, but it is the number one thing you can do to protect your business.
Train Your Employees on Your Risk Management Plans
It does no good to have a risk management plan if your employees don’t know about it or how to use it. That’s why you need to hold scheduled risk management meetings and trainings for key decision makers. It’s your employees who keep your business running, so there is only so much you can do as a business owner. In addition, your employees may have additional insight into your business that will help strengthen your risk management plans.
Monitor and Update Your Risk Management Plan Often
You can’t just make a risk management plan once and then file it away. Risk management planning is an ongoing process that requires careful monitoring and attention. Your risk management plan should be reviewed and modified quarterly, or more often if needed. Businesses that do not have risk management plans often go out of business because they do not plan for financial problems and other situations that damage their business.
These are the basic tenets of organizational risk management. As your business continues to grow, your risk management plans will continue to change. However, if you stay ahead of possible problems, your business will have a much better chance of success.
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