PrintEmail

Business owners and managers within organisations had additional concerns - business premises, operating equipment, stock, staff, loss of revenue and possible livelihoods. How many organisations, large and small, had adequately prepared for such an event?

Risk management is a topic that makes some people think insurances and others, to run to the hills. However, there is more to risk management than insurance and there are simple steps every business and organisation should take to prepare for the unexpected.

‘Risk’ applies to any management decision which could have either a good or bad outcome. It may also be a future event which results in actions taken now. A hazard is anything that can go wrong or cause harm. A risk is the chance that the hazard may cause a problem. Risk assessment requires defining what could go wrong and risk management involves taking steps to control the risks.

Context

Risk may be non-entrepreneurial i.e. an accidental or deliberate event that threatens a business and impacts upon its normal functioning, like fire, pollution, fraud. Risk may also be entrepreneurial i.e. a merger or change process, a new product launch. A crisis/risk can be caused by an act of nature, an intentional act or an unintentional accident. Risks need to be managed as a system, so that they are managed in a proactive, co-ordinated, cost-effective and prioritized way.

The purpose of risk management is to identify and manage the two key areas of risk – the strategic and the operational; to undertake risk analysis to determine what risks are worth pursuing; to manage crisis situations; to separate the management of a crisis from the day-to-day functioning of the business; to avoid cost, disruption and distress; to proactively prepare for the unexpected.

There are three parts to risk management processes:

Part One – Pre-Crisis Assessment and Planning

1. Identify and assess risks – conduct ‘what-if’ analysis for every potential hazard/threat to the business – this can be done using a probability and severity chart. Set priorities – which ones have the highest priorities? Determine how to minimize, transfer or spread the risk i.e. through a crisis plan, determining alternative options for every ‘what if’, ensuring the cost of the plans are proportionate to the actual risk.

2. Set policies for each area of risk i.e. how we manage the risk

3. Implement the policies