Identifying business risk – Risk Management Series

Identifying business risk – Risk Management Series


This is a short video on identifying risks
to your business which is part of our risk management series of videos. So, what is risk? A risk is the likelihood
of something happening as a result of a hazard or threat and the impact it will have on your
business activity. Risk comes from uncertainty. Its measured in terms of the likelihood of
it happening and the consequences if it does happen. Every business has risks. Just think
for a moment about the hundreds of things that most business owners worry about. While
few are predictable others are not. You can however plan and control risks to a certain
extent. Some of these could be changing salary costs, taxes, overhead expenses, equipment
and supply costs. Others are unpredictable and largely beyond
your control such as the actions your competitors may take; changing tastes and trends; disasters;
industrial accidents and global economic factors such as rising oil costs and increased costs
of raw materials. These events can and do happen to businesses all the time. They can
directly affect your day-to-day operations or impact on profits and result in financial
losses that may be serious enough to cripple the business or even bankrupt it. It is not
always easy to recognise the hazards or threats that can lead to adverse consequences. For
example, unless you have experienced a fire you may not realise how extensive fire damaged
can really be. Damage to the building and its contents are
obvious exposures but you should also consider damage from smoke or water, damage to employee’s
property for example personal belongings or tools and to property belonging to others
for example machinery and equipment leased from other businesses. There’s also the impact
on the business during the time that it takes to get the business back to normal and the
effect on customers and staff who may not return when you re-open the business. The risk management process involves of a
series of steps that when undertaken in the right sequence leads to continual improvement
in decision-making. They are:- Step 1: Identify risks that could impact your
business. Step 2: Analyse risks to assess their impacts.
Step 3: Evaluate risks to prioritise their management.
Step 4: Treat risks to minimise their impact and
Step 5: Develop and review your Risk Management Plan. Risk management is not something you’ll do
only once. You need to constantly monitor and review the strategies you’re using to
manage risk. Risks do not always remain the same. You may find that over time new risks
are created; existing risks increase or decrease; risks no longer exist; the priority order
of risks changes, or risk treatment strategies are no longer effective. Risk management processes
are all about reviewing all areas of your business to evaluate possible risks, and then
putting in place strategies to treat those risks. Sound strategies can ensure business
continuity; reduce insurance premiums; reduce your chance of being sued; reduce the time
your business may be unable to operate; allow for a plan to replace key personnel; reduce
the loss or damage to machinery and other equipment necessary for the efficient running
of the business and strengthen your chances of staying in business. There are limitations to the risk management
process you should be aware of. These include that risk management will not eliminate all
risk. Its impossible to plan for and treat all of the risks to your business. Accidents
can and will happen and this may lead to an incident. Your ability to manage risk will
be influenced by your resources, budget, time and the information you have available to
you. Risks can be both internal and external to
your business. They can be hazard based for example chemical spills. Uncertainty based
such as natural disasters or associated with business opportunities. That is whether you
decide to accept or ignore them. Businesses often fail to look at risk broadly enough
and tend to consider the most obvious things like fire, theft, and market competition.
The questions to ask yourself are:- What could cause an impact? How serious would that impact
be? What is the likelihood of this occurring? Can it be
reduced or eliminated?

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