Got Business Risk? Here’s How to Mitigate it.
Knowing what risks and exposures your business faces is a good start to building a solid risk management strategy. But just being aware of the threats to your business isn’t enough. Effective risk management requires thinking and planning ahead.
Waiting to see if bad things happen before attempting to mitigate losses is a reactive strategy that will keep you in crisis management mode. Being proactive in assessing the potential for risk and creating plans for how to handle scenarios that could arise is what will bring you into risk management mode.
Here are five steps to guide you down a successful risk mitigation path.
1.) Recognize your threats
No one likes doomsday scenarios, but this is the time to think dangerously. Take a close look at your business and the risks associated with it. Be sure to consider general business risks and those specific to your industry or model. Make a comprehensive list of hazards and threats that could affect your organization in a significant way.
2.) Conduct an analysis
Which risks are more or less likely to occur? Which events would be most catastrophic? Which risks are most preventable? Analyzing the potential likelihood and impact of each threat so you can prioritize which risk mitigation strategies need your attention the most. Consider ways to prevent incidents from happening and to manage potential consequences when they do.
3.) Create a risk reduction a plan
Once you’ve identified your key risks and prioritized them in order of urgency, probability, and severity, you can start putting together a risk management plan. First, come up with workable strategies for risk prevention. These could include implementing safety measures, taking financial precautions, or making changes to key processes and/or hiring practices. For risks you can’t prevent, build strategies for dealing with each scenario should it happen. If you do experience an incident, having clear emergency procedures, contingency plans, and communication protocols can help mitigate confusion and losses.
4.) Build accountability into the process
You’ve identified and prioritized your risks and put together plans to reduce, prevent and mitigate them. But those plans aren’t worth anything if you don’t actually put them into action. Dropping the ball here will mean all of your hard work was futile. Decide who will be responsible for implementation and how, exactly, each process will work. Hold people accountable for following through in their respective areas.
5.) Reevaluate regularly
Recognize that today’s risks may not be the same next year or even next month. Even the best risk reduction strategy ever will need to be changed over time. Risk management is a constant process that needs to be evaluated and updated regularly.
6.) Consult with a professional
You’ve poured tons of time, energy, and resources into your business. You are counting on it to succeed, and so are your employees. Don’t leave this up to chance.
Work with an insurance consultant who has experience in risk management. Even better if they have specific knowledge or expertise with your particular industry, as your risks will vary based on your business operations and needs.
A knowledgeable insurance broker or consultant can be the difference between taking a proactive risk management approach or merely reacting in a crisis management role.
Don’t wait for an unfortunate incident to inspire you get your risk management strategy in order. First, identify your risks. Then identify a trusted advisor who can help you reduce those risks and keep your business running healthy and strong.
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Photo by Saroj Khuendee