The Many Factors to Consider in Business Risk Management
Priyansh Solanki
The Many
Factors to Consider in Business Risk Management
Creating a risk management plan is central to
the operation of any successful business. A truly effective plan will address
all areas of possible risk to the business’ information, employees, physical
assets, and finances. While it is not possible to predict all sources of risk,
it’s important to mitigate as many as possible to protect the company from
damage, liability, and other sources of loss.
Business Risk Management Defined
A variety of different risk factors can affect
the ability of a business to operate effectively. Risk management is a process
by which the most important risks can be identified, prioritized, and mitigated
or eliminated. The strategies used to deal with risks break down into four main
categories. Getting insurance is one way; eliminating high-risk areas or reducing
them are two others. Also, a company can accept the consequences of a risk and
budget for it.
Identifying and Managing Risk
The process for identifying and managing
business risk is fairly standard and consists of five basic steps. To begin
with, identify the company’s risks assets. Next, measure, quantify, and qualify
possible damages. Then, you must come up with strategies to limit the damage.
Fourth, implement the strategies. Finally, the company and its risk managers
must continue to monitor the risk to see if the implemented strategy is
effective.
Business Risks to People and Property
Business risks can take a wide range of forms,
which means that business risk management plans must cover an equally wide
range of policies. On a very basic level, ensuring employee and equipment
safety by preventing accidents is important. Disaster preparedness is also an
important component of business risk management and should include things like
fire, flood, and critical incident plans. Another important part of a risk
management plan is making sure that data are backed up regularly and are secure
so they cannot be accessed by unauthorized personnel.
Business Risks to Finances and Strategy
Risks to the financial resources are often
treated differently from other sources of risk when coming up with a risk
management plan. Financial risk management plans often include guidelines for
how to make financial decisions. They also codify how much risk and what kinds
of risks are acceptable for the company to take. Plans to handle strategic
risks are similar in that they would lay out how decisions about how to make
advertising, research, and development, and other business practices.
Operational Risks
Operational risks are risks that come from the
way the business operates both internally and externally. External risks are
things like changes in political climate, regulations, suppliers, and
contracts. Internal risks include the possibility of the failure of internal
systems or processes. Loss of physical assets to disasters like fire or flood
is an example, as is loss due to the computer system crashing. A business risk
management plan would also need to address human error, as well as fraud,
theft, and other illegal activities.
Business risk management planning includes the
consideration of a wide variety of risk factors, including those to people,
property, financial assets, strategy, and operations. It’s an important
precaution to have a plan in place for as many of these factors as apply to a
business.
Priyansh K. Solanki