Identify and manage business risks

There are many types of risks associated with running a business. Some of these potential hazards may damage the enterprise, while others may cause serious damage, which is expensive and time-consuming to repair. Despite the hidden risks in conducting business, CEOs and risk managers can predict and prepare, regardless of the scale of their business.

Identify risks

If the risk becomes a reality, a well-prepared company can minimize the impact on revenue, lost time and productivity, and negative impact on customers. For start-ups and mature companies, the ability to identify risks is a key part of strategic business planning. Identify risks in a variety of ways. The strategy for identifying these risks relies on a comprehensive analysis of the company’s specific business activities. Most organizations face preventable, strategic, and external threats that can be managed by accepting, transferring, reducing or eliminating them.

Risk management consultants can help companies determine which risks should be covered by insurance.

The following are the main types of risks faced by the company:

Physical risk

Construction risk is the most common type of physical risk. Think about fire or explosion. In order to manage construction risks and risks faced by employees, organizations must do the following:

  • Ensure that all employees know the exact street address of the building so that it can be provided to the 911 operator in an emergency.
  • Ensure that all employees know the location of all exits.
  • Install fire and smoke detectors.
  • The installation of sprinkler systems can provide additional protection for the physical plant, equipment, documents, and of course personnel.
  • Inform all employees that in an emergency, their personal safety is above all else. Employees should be instructed to leave the building and discard all work-related documents, equipment and/or products.

There is a risk of hazardous materials where leakage or accidents may occur. The risks of hazardous materials may include:

  • acid
  • gas
  • Toxic gas
  • Toxic dust or filings
  • Toxic liquid or waste

The hazardous materials unit of the fire department is ready to deal with these types of disasters. However, personnel using these materials should be appropriately equipped and trained to handle them safely.

The organization should develop a plan to deal with the direct impact of these risks. Government agencies and local fire departments provide information to prevent these accidents. These agencies can also provide advice on how to control them and minimize their damage when they occur.

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Key points

  • Some risks may destroy an enterprise, or at least cause serious damage, and repair costs may be high.
  • The organization should determine which risks pose a threat to its operations.
  • Potential threats include location hazards such as fire and storm damage, technical risks such as personnel alcohol and drug abuse, power outages, and strategic risks such as R&D investment.
  • A risk management consultant can recommend a strategy that includes employee training, safety inspections, equipment and space maintenance, and necessary insurance policies.

Location risk

The location hazards faced by companies include nearby fires, storm damage, floods, hurricanes or tornadoes, earthquakes, and other natural disasters. Employees should be familiar with the streets in and out of the community in all directions. Individuals should keep enough fuel in their vehicles to drive out and stay away from the area. Liability or property and accident insurance is usually used to transfer the financial burden of location risk to a third party or commercial insurance company.

Human risk

Alcohol and drug abuse are the main risks faced by staff. If necessary, employees who suffer from alcohol or drug abuse should be urged to seek treatment, counseling, and rehabilitation. Some insurance policies may partially cover the cost of treatment.

Preventing corruption, theft and fraud can be difficult, but these are common crimes in the workplace. The double signature requirement system for verification of checks, invoices and accounts payable helps prevent corruption and fraud. Strict accounting procedures may detect corruption or fraud. A thorough background check before hiring personnel can reveal the applicant’s past crimes. Although this may not be a reason for refusing to hire candidates, it will help HR avoid placing new employees in key positions where employees are vulnerable to temptation.

Illness or injury in the workforce is a potential problem. In order to prevent the decline in productivity, reserve personnel are allocated and trained to handle the work of key employees when they are absent due to health problems.

Technology risk

Power outages are probably the most common technical risk. The auxiliary gas generator is a reliable backup system that can provide electricity for lighting and other functions. The manufacturing plant uses several large auxiliary generators to keep the plant operating until utility power is restored.

The computer can use a high-performance backup battery to maintain normal operation. Power surges may occur during thunderstorms (or randomly), so organizations should equip critical business systems with surge protection equipment to avoid file loss and equipment damage. Establish offline and online data backup systems to protect key documents.

Although telephone and communication failures are relatively rare, risk managers may consider providing emergency-use corporate phones to those who use the telephone or the Internet for their business.

Strategic risk

Strategic risk is not entirely undesirable. Financial institutions such as banks or credit cooperatives bear strategic risks when providing loans to consumers, while pharmaceutical companies face strategic risks through the development of new drugs. Each of these strategy-related risks is inherent to the business goals of the organization. When building effectively, accepting strategic risks can create highly profitable operations.

Companies facing major strategic risks can mitigate potential negative consequences by creating and maintaining infrastructure to support high-risk projects. The system established to control the financial difficulties that occur when risky companies fail usually includes the diversification of current projects, healthy cash flow or the ability to finance new projects in an affordable way, as well as the review and analysis of potential companies based on the following factors The return on investment of the integrated process in the future.

Conduct a risk assessment

After the risks are identified, they must be prioritized based on an assessment of their likelihood.

Establish probability scales for risk assessment.

For example, the risk may:

  1. Very likely to happen
  2. Have a certain chance of happening
  3. Chance of occurrence is small
  4. Chance of occurrence is small

Other risks must be prioritized and managed according to their probability of occurrence. Actuarial tables-statistical analysis of the probability of occurrence of any risk and the potential financial losses caused by the occurrence of these risks-can be accessed online and can provide guidance for determining the priority of risks.

Risk insurance

Insurance is the basic guarantee for managing risks, and many risks can be insured. Fire insurance is essential for any company that takes up physical space. Whether it is fully owned or leased, it should be the top priority. As an obvious example, product liability insurance is not necessary for service businesses.

Certain risks are undoubtedly a high priority. For example, there is a risk of fraud or misappropriation of public funds when employees handle money in accounts payable and accounts receivable or perform accounting duties. Specialty insurance companies will underwrite cash deposits to provide financial protection in the event of corruption, theft or fraud.

When insuring potential risks, never assume the best case. Even if employees have been working for many years without problems and their services are exemplary, they may need insurance against employee errors. The insurance coverage for injuries will depend on the nature of your business. Of course, heavy-duty manufacturing plants need to provide employees with broader protection. In this case, product liability insurance is also essential.

If a company relies heavily on computerized data (such as customer lists and accounting data), external backups and insurance are required. Finally, hiring a risk management consultant may be a prudent step to prevent and manage risks.

Risk prevention

The best risk insurance is prevention. It is best to prevent many risks in your business through employee training, background checks, security checks, equipment maintenance, and physical site maintenance. A responsible staff member with management authority should be appointed to handle risk management responsibilities. The risk management committee can also be composed of members who are assigned specific tasks and require reporting to the risk manager.

The risk manager should work with the committee to develop an emergency plan, such as:

  • fire
  • explode
  • The occurrence of dangerous goods accidents or other emergencies

Employees must know what to do in an emergency and where to leave the building or office space. A safety inspection plan for physical premises and equipment shall be formulated and implemented on a regular basis, including training and education of personnel when necessary. All potential risks should be reviewed regularly and strictly. Any problems should be resolved immediately. Insurance coverage should also be periodically reviewed and upgraded or downgraded as needed.

Prevention is the best insurance against risks. Employee training, background checks, safety inspections, equipment maintenance and physical site maintenance are critical risk management strategies for any company.

Bottom line

Although commercial risks abound, and their consequences can be devastating, there are still some methods and methods to ensure that these risks are prevented, prevented, and their damage is minimized when they occur. Finally, hiring a risk management consultant may be an important step in preventing and managing risks.

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