What is risk management?
Every business activity carries a certain amount of risk that could adversely affect your company’s results, and to minimise their impact, the risks must be identified, assessed and managed.
Business risks are normally considered in relation to specific goals and expressed as an amount of potential loss.
Four risk management strategies
- Risk Acceptance – For smaller risk or when it’s worthwhile for the potential gain.
- Risk Reduction – For example, secure at least two or three customers instead of relying on one big customer.
- Risk Transfer – For example, buy an insurance policy, find a co-founder or business partner, etc.
- Risk Avoidance – When the risk is too high and it’s better to give up the activity.
Our risk management process
Identifying risks (internal and external, and by function: finance, production, HR, distribution, etc.)
Assessing the potential impact of each risk (potential damage or loss, probability of an event, etc.)
Selecting a risk management strategy for the identified risks.
Developing a mitigation plan for each risk that details how the selected strategy will be implemented, and the risks reduced or transferred.
Building a risk culture (training employees to identify potential risks in their area of work, developing a mechanism for reporting the risks to the management, etc.
Building a risk register, which clients can review and update periodically.