To Identify, assess and mitigate risks can be a high mountain to climb for some business owners – daunting and challenging!
Clearly, the task of risk management is a major thing – estimating and calculating the risks for the company, the owner and the people in it rely on a thorough risk assessment.
Risk management, especially for small and medium-sized companies, remains a task for the business owner to protect their assets, also for an eventual decline of the company and the personal risk for liability – risk management is a good way to protect your assets and your existence.
Statistics show that especially mid-sized companies are aware of risk and deal intensively with these. 81% of all medium-sized companies in a survey say that risk management is of vital importance to them.*
The financial crisis a few years ago has helped to alert business owners that something major can go wrong which may not be under their direct control.
However, the survey also showed that very few companies are really satisfied with their risk management process, because most find that longer-term planning would achieve better results and mitigate risk more adequately.
Typically, the risk analysis of risks covers only 1-2 years out, so risks in some distant future find no or very little attention and quickly fall off the planning table.
There are many SMEs for example that need to catch up on online security and the risks involved – many rely on external servers and the World Wide Web for storing their data. There are lots of security holes that may put the stored data at risk and thus the entire viability of the company.
5-easy-steps to start risk management:
1 First, risks must be identified.
2 Next follows the causes and possible effects of the risk identification – add the likely probability to the risk occurring – then calculate, review and re-calculate.
For example is it quite unlikely that the Internet will no longer exist, and that the stored data is lost. A hacker attack or server crash occurring is a lot more likely and must therefore be considered.
3 Dealing with (potential) threats – some risks are predictable and can be dealt with quickly – others, however, are more serious and require closer inspection.
4 Once the concrete risks are identified and validated through deeper analysis, then they need to be monitored, so that current and also long-term risk in particular can be factored in.
5 Lastly, all identified risks and their analysis should be documented. The results should be transparent and followed up by ongoing reviews in order to ensure a more precise assessment can take place.
In summary: a sound risk management system not only protects your assets and your very existence – it also contributes positively to the bottom line profitability.
Please comment on my post – I look forward to your feedback.
* The middle-class and its banks, a survey conducted by the Commerzbank, 2014