Managing Risk in Your Business

Part of the Business Studies For Dummies Cheat Sheet

Risk management is the process of understanding and anticipating potential problems, and then taking steps to minimise any impact that may occur as a result of these problems. Here are six steps for managing risk in your business:

  • Identify the risks. The possibilities for loss are almost endless. What risks is your business exposed to?

  • Assess and prioritise potential risks. Make sure that you include everything that could conceivably go wrong. Make sure that people are trained and briefed in risk management. Always pay attention to any risks inherent in technology failure.

  • Quantify risks. Use as much data as you need to assess the likelihood or probability of things going wrong. Then decide whether or not you are prepared to accept the risk, and if so, under what conditions.

  • Select the right risk management tools to deal with each potential risk. Develop a risk management process and plan with specific strategies for dealing with risk in your business. In some cases, prevention is the right course of action. In other cases, staff training is necessary. Always make sure that you are fully and comprehensively insured.

  • Evaluate the results of your risk management approaches, and revise or renew them as appropriate. Write down your risk management strategies and processes. Make sure that everybody has a copy. Keep them under constant review. Especially when things go wrong, evaluate the ways in which risk management strategies operate, and revise them if required.

  • Put someone in charge. Always make sure that someone is responsible for risk management. Make sure that they have as much authority as is necessary to keep risks to an absolute minimum, and address them quickly and comprehensively when things do go wrong.

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