One important consideration on the part of management’s effort in determining the future of the organisation is to strategically put in place policies and programmes that would mitigate against threats and risks in economic gains and prosperity.
By being able to scan the business environment and identify the potential risk factors, management ought to strategise on how such impediments could be curtailed or minimised to prevent their negative impacts on the growth and success of the enterprise. A number of positive initiatives abound in tackling the risks, but these depend on the kind of risks identified and how much negative impact they can have on the firm.
In fact, there are multiplications in the rise of risk errors, indecisions that have negative economic consequences and avoidable mistakes by staff and management in their daily affairs. Special attention needs to be paid to these, in order to eliminate the tendencies that would derail the business fizzling out in competition and in market share in today’s volatile and dynamic environment.
In their many basic business and financial planning, management must foresee the kind of risks to meet; evaluate and prioritise them in a scale order so as to know which ones to tackle first. Once established, the purpose for which the identification was done is to keep the firm viable and competitive. If the objective was to prevent theft, fire outbreaks, leakages and spillage, then management must beef up its security systems and employ security cameras all over and invest in the security of the company to prevent theft and burglary. The fire service department too, must be contacted in the anticipation of fire and its related consequences.
Also, if the goal is to protect data, files, records and other physical assets of the enterprise, then management again must seek expert advice on how to prevent the damage of these important facilities. They must find ways of preserving them in order to forestall their utmost use and benefits to the company concerned.
Imperatively, there are a number of risks management traits to consider in a bid to prevent disaster before they happen. Uncertainty in the financial markets, fraud, failures associated with projects, credit risks and accidents at the work place, including natural ones like floods and earthquakes must all be factored in the risk management processes of the company.
The vulnerabilities that exist in any forms once identified, must also not to be overlooked in this regard. In fact, adopting a risk management effort as part of management’s quest to protect the company should be seen as a proactive step but not as a responsive or reactive process. This is to help the company succeed without which it will take a bow in the event of uncertainties.
Studies point out that, an ineffective thought-out plan to deal with risks is as dangerous as not planning for one at all.
Because there are no long term benefits, sometimes, managers may not consider its importance in the immediate term and may not put that on their schedules. However, the ultimate in the reduction of costs, loss of revenue and profits should advise management to get a well laid plan to deal with these kinds of threat as they may come up. In fact, one thing is assured. That is, the unexpected event will one day occur and a prepared market place risk having enough insurance coverage to compensate for losses and antidotes to prevent losses and the unexpected in any form, should suffice for whatever damage may rear its head.
Having been identified, tasks should be evaluated for their chances of occurring, using a probability scale of 1.Very likely to occur. 2. Some chances of occurring 3. Little chance to occur and 4. Very little chance to occur.
In this regard, management then should assess their probable financial damages in order to meet their obligations accordingly should they occur. Thus, per the nature of the risk assessed, management would be able to know how to deal with them economically and in the best of business practices.
Procedurally, the risk management process should take a 5-step format. Management ought to identify and evaluate the probable loss or risk in the first place. There should be an identification of the damages to occur, losses and the potential negative incidents that could happen in this phase.
Secondly, the risks noted should be accepted and allocations made as to what to do in the event of their occurrences, who to be responsible for in dealing with it and which department or agency can be of help in this regard.
Next, there should be plans to prevent or mitigate against envisioned risk damages and losses as identified, while the next process should be about proactively having emergency plans as the plan Bs.
However as a final step, whatever is adopted should also be assessed and evaluated with regards to its effectiveness and procedures based on the specific risk to be dealt with. Here, the result should be a proof of a reduced incident or nothing of the risk being seen.
Inadvertently, exposures to risk at the workplace are normally overlooked despite the fact that most managers are well aware that they exist. Even though there is the initiative to safeguard against risks, it is only the sagacious managers who prudently take measures to greatly reduce the loss. An effective risk management system is essential and this mandates for a constant analysis and communication of the processes to get to the goals of the protection plans.
The dynamics in technology and societal tastes and preferences have impacted significantly on the visions and missions of businesses. These have led to injuries, fraud, losses and collapse of businesses.
It is estimated that injuries alone cost businesses $250b annually and this is $31b much more than the direct and indirect costs of all cancers, while being $76b again more than diabetes and $187b more than strokes officially recorded. In a nutshell, these costs to businesses can dwindle fortunes in growth and development. They can affect an entire workforce and their dependents as well.
Ostensibly,acknowledging the fact that risk management should be part of the schemes of management’s itinerary, the principles and concepts underlying, must well be understood. This is, in fact, made known to be the fulcrum that drives the survival and the longevity of the business in the event of the negatives. It should be seen to be more important than a regular checkup and maintenance of the office machines and equipment.
Truly, an effective and efficient risk management accords an entity the platform to thrive well in the face of stiffer competition, unforeseen disasters, both naturally and man-made, as in financial gains and eventually, helping to grow and develop a company to reap its targeted profits.
Note: The article titled “5 Facts to consider before applying for business loan” which was published last week was also written by this author.
The writer is a Business and Financial Analyst. email