IMPORTANCE OF RISK ASSESSMENT AND RISK MANAGEMENT
As individuals, we all find risk to be inherent in our everyday lives. Likewise, if you are a business owner or employed in a key management role, you will find business risk to be inherent during the life of your business or organisation.
It is important that you fully understand and appreciate business risk, before even considering "assessing" and "managing" your own business risk.
What is Business Risk?
Business risk can be defined as being an event or any number of circumstances that will have a negative effect on your business or organisation.
Are you Assessing and Managing Business Risk?
It is vitally important and integral to the success of your business or organisation that you "assess" and "manage" its business risk.
Assessing and managing business risk should enable you to recognise the material or significant business risks facing your business or organisation, for example when you have to:
- Decide on how best can you achieve your business's or organisation's objectives?
- Decide on your financial transaction procedures, your financial systems, and business
- Decide on your operational and administrative procedures.
- Decide on the need for your business or organisation to comply it's with laws, regulations, standards and
- Decide on the reputation or goodwill of your business or organisation.
Interestingly, the need for and the importance of business risk assessment and risk management is now widely accepted by many businesses as well as many commercial and public sector organisations.
What are the consequences of not Assessing and Managing your Business Risk?
Failure to effectively assess, and manage your business's or organisation's business risk can result in:
- Not achieving its business objectives.
- Diminishing its value to stakeholders.
- Squandering its resources.
- Damaging its image, reputation, and goodwill.
Singh Consulting Group is a global business and management and consulting firm, that can help your business or organisation to effectively recognise, assess, and manage business risks that are specific to your business or organisation.
Our consultants have the professional knowledge and business experience to help put together a Business Risk Management Plan that is tailor made for your specific business or organisation. Your tailor made plan will:
- Enable you to think about how you can improve your current business process.
- Enable you to identify who is responsible for what should a disaster occur.
- Enable you to communicate the plan to all the people it refers to.
- List in detail a number of strategies/steps required to be undertaken.
The process to be adopted will involve undertaking the following steps:
Step # 1 - Identifying Business Risks
This will involve:
- Evaluating each function in your business or organisation and identifying anything that could have a negative impact on your business or organisation.
- Considering any external business risks that may have an impact on your business or organisation.
- Brainstorming with your employees or staff.
Step # 2 - Assessing Business Risks
This will involve developing a "Risk Analysis Matrix". The matrix will assist us in assessing each identified business risk so that we can determine the level of the business risk such as:
- The likelihood (frequency) of the risk occurring; and
- The consequence (impact) of the risk occurring.
Step # 3 - Managing Business Risks
Managing your business risks involves developing cost effective options that will help you to deal with them, for example:
- Avoid the business risk (i.e. this may involve changing your business process, equipment, or material so as to achieve a similar outcome but, with less risk).
- Reduce the business risk (i.e. this could include documenting procedures and policies, complying with legislation, staff training, maintaining equipment, etc.).
- Reduce the business risk (i.e. this may involve transferring some or all of the business risk to another party).
- Accept the business risk (i.e. this may be your only option).
Step # 4 - Monitor and Review Business Risks
This will involve, having to get into the practice of regularly monitoring and reviewing your risk management plan as this will ensure that your control measures are adequate.