Dealing with business hurdles: The 'what now?' of enterprise risk management
Imagine this: You're planning a big outdoor party, but there's a forecast for rain. So, you rent a big tent.
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That tent is your backup plan – your response to the risk of rain. In the business world, this act of predicting hurdles and having plans to deal with them is termed as 'risk response and mitigation'. In this article we dive some more into this topic.
Understanding the Playground
First, think of a business as a football match. The game is your daily operations, the ball (entering the net) is your product, and the players are your team.
Now, in this match, not everything goes as planned. Sometimes, the weather turns bad, a player might get injured, or the ball might get punctured.
And a player who is not yet a “star” cuThese unexpected events are risks. And just like a coach plans strategies to handle such situations, businesses need to decide how to respond to risks.
Choosing Your Response
There are a few ways businesses can respond:
1. Avoidance (The Detour Strategy): If there's a large pothole on the road, you'd probably take another route to avoid damaging your car. Similarly, businesses might avoid a particular project or venture if they feel the risks are too high.
2. Reduction (The Prep-Up Strategy): Just like wearing a helmet when riding a bike to reduce the risk of injury, businesses can take steps to lessen the impact of a risk.
3. Transfer (The Pass-the-Ball Strategy): In a football game, if a player feels he might lose the ball, he passes it to a teammate. In the same way, businesses might transfer some risks, like through insurance.
4. Acceptance (The Roll-with-the-Punches Strategy): Sometimes, it's about knowing the risk and preparing to deal with it head-on, like a goalkeeper ready to face a penalty kick.
Making the Risks Smaller
Mitigation is about making those business hurdles smaller or less damaging. It's like putting up safety nets or bumpers. Let’s consider a few business safety nets.
1. Backup Plans: Just like having an umbrella in your bag just in case it rains, businesses create backup plans for various scenarios.
2. Training and Education: Equip your team. If your employees know what to do in case of a glitch or a crisis, they can handle it better. It's like training kids to stop, drop, and roll if their clothes catch fire.
3. Using Technology: There are plenty of modern tools that can help predict risks or lessen their impact. It's like using apps to check traffic on your route and find a quicker way.
4. Regular Check-ups: Just as you'd visit a doctor for regular health check-ups, businesses review their operations and environment to ensure no hidden risks are lurking.
Why All This Matters
Every business, big or small, faces risks. Think about local shop owners. They might worry about fluctuating prices, products getting spoiled, or even theft. On a larger scale, companies might be concerned about market changes, technological shifts, or natural disasters.
The act of risk response and mitigation is like wearing protective gear in a game. Yes, there's a chance of getting hurt, but with the right equipment and strategy, that chance becomes much smaller.
In a Nutshell
Enterprise Risk Management, in its essence, is about playing the game of business smartly. It's about foreseeing the challenges, being ready with solutions, and ensuring the game goes on smoothly, no matter the hurdles.
Every business journey is filled with uncertainties. But with a solid risk response and mitigation strategy, those uncertainties become less daunting. It's the confidence of walking on a slippery path with good shoes on. You know there might be slips along the way, but you're well-equipped to handle them.
In the end, remember this simple truth: Life is full of risks. Whether it's deciding to try a new restaurant, booking a trip, or launching a product, there's always a 'what if?'. But with preparation and a clear strategy, those 'what ifs' become a lot less scary, and the journey, be it in life or business, becomes more rewarding.
The writer is an independent Internal Audit Advisor, Enterprise Risk Management Consultant, and professional trainer. He is the founder and Chief Operating Officer of Redric Consulting, your trusted partner for comprehensive training and consulting services in the fields of Governance, Risk, and Compliance (GRC). With a proven track record in Internal Audit, Internal Control, Compliance, Fraud Risk Management, and Cybersecurity, Redric Consulting empowers your organization and ensures its success.
You may reach out to Frederick on [email protected]