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5 Essential Elements of a Risk Management Strategy

5 Essential Elements of a Risk Management Strategy

Risk management is essential for all businesses, large or small. Without having a risk management strategy, you leave your enterprise wide open to encountering all sorts of “unforeseen” problems. However, with a risk management strategy and plan, those possible unforeseen issues will become evident, allowing you to counteract them before they actually can occur.

Okay, so you now know you should implement a risk management strategy to safeguard your business, but what does it involve? This article will be offering up some pointers when it comes to risk management and what to include in your risk management strategy.

#1 – List Every Possible Risk You Can Think Of

This will likely be an ongoing task, as you couldn’t possibly think of everything in just one sitting. A few pointers in compiling this list.

Ask your employees what potential issues they can see in your operation and make note of those. If you have a friend or acquaintance in the same or similar industry, you could enquire of them what problems their business has faced. Likewise, you could go online and do some research for your industry and discover what some of the common problems are that businesses like yours tend to encounter.

Simply add to this list every time you think of something new, no matter how unlikely or insignificant it may seem. The secret to good risk management is first being aware of what risks you might face.

#2 – Prioritise Your List

Now that you have a list to work with, what you will want to do next is prioritise this list. Ideally, this will be done in two sections.

The first priority list should be evaluating your list and rating the items on it regarding their likelihood of occurring. For example, something you rate 1 is not very likely to eventuate, but a 10 is almost certainly going to present a problem at some stage.

The second stage of prioritising your risk list is to determine the severity of an incident should it happen. This can include things like the potential for physical injury to a member of staff or a customer, to your business losing money if the problem materialises.

Once you have your list prioritised in this way, you’ll clearly be able to see what needs the most attention first and so on.

#3 – Start Putting Countermeasures In Place

You have your list of potential risks and you have it prioritised. Now that you understand which items on that list are most vital, it’s time to start putting countermeasures in place so you can prevent those problems from actually occurring.

Good risk management is about prevention rather than cure, as this will save you a lot of time, trouble, headaches and probably money as well.

Things like improving safety measures, replacing old and worn out equipment, hiring the best staff and more are just a few simple examples of things you can do to avert risk.

#4 – Hire a Risk Manager

If your organisation is large enough and you have enough in the payroll budget to cover the cost, you might want to consider hiring a professional risk manager full time. This way, your risk manager can focus all of their undivided attention on everything that encompasses risk management. This will give you and everyone who works for you more peace of mind, and the risk manager can be the person you or your employees approach whenever they spot a potential weakness in the chain.

Your risk manager can also hold regular meetings to seek feedback and fill everyone in on new processes or changes to health and safety laws etc.

#5 – Add Value To Your Business With Risk Management Software

Whether you plan to hire a risk manager or not, what you will want to invest in to help with risk management is specialist risk management software solutions. The software will assist you in monitoring your business and can even alert you to a problem area before an incident has had a chance to occur. It’s a small investment that could potentially save you tens of thousands of dollars over time. 

The Takeaway

Good risk management is about being prepared and organised. Ideally, you’ll want to be aware of the risks so you can take measures to avoid problems occurring in the first place.