Identifying business risks
Running a business naturally comes with risk – but many company owners and senior management staff aren’t aware of the full scale of risk the organization faces. Good risk management is a vital part of the effective day-to-day running of a company.
There are a huge range of different types of business risk, from economic and environmental challenges to technological and location-based risks. Identifying business risks is an important part of being able to create a plan to deal with the different types of problem that can be encountered.
In this article, we will take a look at some of the steps that your company can take to identify risks, as well as aspects that everyone across the organization is responsible for regarding mitigating and managing business risks.
Understand the scope of the challenge
When you are at the beginning of the risk management process, the whole thing can look daunting. So, really the first thing you need to do is start at the top with a high level analysis; this will provide you with a crucial understanding of the scope of the challenge that you face. Business risk comes in many different forms, so it is hugely valuable to break down the key areas of challenge.
It can be helpful here to ask big questions, perhaps the most useful being: “what if”. What if an employee makes a mistake due to lack of training? What if you lost your biggest client? What if a hacker breached your IT system? What if your head of marketing suddenly resigned?
These types of questions can help you get to the bottom of the biggest issues that your company can face.
Direct risk vs. indirect risk
It should be noted that there are fundamentally two different types of risk that a company can come up against: direct risk and indirect risk. Both can present problems and challenges for the business; however, while direct risks tend to more obvious and more damaging, they are also easier to plan for. Indirect risks may feel smaller, but they can also be highly unpredictable.
Direct risks can involve everything from issues with staff, economic issues (whether company only or broader global problems), environmental, technology, security, and even natural disaster. All of which can be devastating in their own way.
Indirect risks are those things that don’t happen directly to your company but have a knock-on effect that does impact you. For example, if you rely on suppliers from a specific country, and that region suffers a natural disaster, you made need to look into alternative ways to source whatever it is that you need.
Seek feedback from staff
Ultimately, some of the people who are best equipped to provide your business with key information on the risks you face are the people on the ground. Everyone from frontline staff to managers will have a different perspective on potential challenges for the company, and all of this can make for fantastic feedback.
This kind of feedback can be captured in a number of ways, whether it is through anonymous surveys sent around to every member of the team, through to sit down 1-to-1 interviews, where the object is to get as much information as possible. Group discussions can also be a great way to get people talking and thinking about potential problems that arise.
Plan for the worst
When it comes to identifying business risk, it can really pay to be as pessimistic as possible. If you always plan for the worst-case scenario, then you will always be prepared for the possibility of it occurring. That’s not to say that you should assume the worst will happen. Nevertheless, in any scenario, it tends to pay to be more cautious than less.
It is fine to make plans that you don’t ever want to see happen. For example, if you are a company of 30 people, understanding who you would make redundant and in what order during a financial crisis can feel unpleasant, but it is important to have that plan in place.
Take expert consultations
With any kind of business risk, it is important to take consultations with experts in that area to understand what you can do to prepare the company and mitigate risk. Accountants and financial advisors should be consulted regarding monetary matters, for example. Getting an outside voice can be invaluable.
Use business coaching
It is also important to make use of high-quality business coaching. Working with a business coach can provide members of the management team with the training not only to be able to recognize areas of potential risk, but also equip staff with the range of skills needed to manage these risks more effectively.
A huge part of how you deal with business risk is not the damage that they can cause themselves, but rather how your business is prepared to respond to them. Good business coaching focuses on strategies to minimize risk.
If you would like to learn more about why business coaching and mentoring is an important way to mitigate business risk, don’t hesitate to get in contact with the experienced and knowledgeable team at Activate Group.
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