We’ve all heard the saying: “Failing to plan is planning to fail.” Risk management then would be “Know what risks your business has (or to which it could be exposed), and put measures in place to reduce, or even better, avoid them completely, to keep your venture safe.” The best way to identify such threats is to have an effective risk management plan.
A Plan, Really?
A few months ago, nobody would have thought a flu-like virus would be able to economically cripple the world. Companies who had identified such a threat would be better prepared to deal with the significant financial impact that COVID-19 is causing their enterprises. Fewer consumers venturing out for fear of their health equals reduced sales equals fewer profits.
Point Taken! So, What’s Next?
A risk management plan sounds complicated, but it’s not. You and your in-house team could draw one up together. After all, it’s always best to get inputs from different people. If you’re not up to it, you can pay an external company to do it for you.
There are many able to assist, ones that will visit site, complete the necessary risk analysis, and put forward a proposal. Two of the best financial risk analysts you could have are your insurance broker and your accountant.
Can I Start the Groundwork?
Of course, you can!
A simple outline for your risk management plan should include:
Identification of risks – this useful guide lists eight ways to identify risks that could affect your organization. There are four threat categories to consider: Market, financial, reputation, and operational.
Analysis of risks – knowing what risk may affect your business will enable you to analyze how much it is going to cost you at the end of the day.
Controlling risks – you’ve identified risk and quantified the financial impact it would have on your venture; now you can put plans in place to reduce the blow or eradicate the threat. One of the simplest ways to control risk is to ensure that you have insurance cover in place.
Treating risks – you weren’t able to control the danger in time, or didn’t identify it at all. You have to address the risk. Here are five ways to do so.
What are the Advantages of a Risk Management Plan?
Given that the primary purpose of a risk management plan is to identify risk exposure, one of the most significant advantages would be that it helps keep the company safe from both internal and external events that may cause it harm.
Other advantages are:
- Knowing what your risk exposure is, allows you to obtain the correct insurance cover for your business. Using a reputable broker for this purpose could save you money on expensive premiums, or excess payments should you need to lodge a claim.
- Knowing the physical risks within your company’s work areas allows you to address them and create a safe environment for yourself, your workforce, and your clients.
- If, in the event of a lawsuit, the business can continue operating while still being able to settle legal costs. This could be done through legal insurance, or by budgeting for legal expenses.
Having a risk management plan in place is an asset – to everyone who deals with your company.