Comprehensive business risk management is a multi-stage process that will vary depending on the needs and requirements of each individual enterprise.
The first stage is to determine exactly what the risks facing your business are, in order to assess the likely and potential impact of each incident occurring.
Once this process has been completed, you can get down to evaluating the technique which will best suit your business and maximize your risk management moving forward.
Here are the four key potential risk treatments to consider.
Obviously one of the easiest ways to mitigate risk is to put a stop to any activities that might put your business in jeopardy.
However it’s important to remember that with nothing ventured comes nothing gained, and therefore this is often not a realistic option for many businesses.
The second risk management technique is reduction – essentially, taking the steps required to minimize the potential that an incident will occur.
Risk reduction strategies need to be weighed up in terms of their potential return on investment. If the cost of risk reduction outweighs the potential cost of an incident occurring, you will need to decide whether it is really worthwhile.
One of the best methods of risk management is transferring that risk to another party. An example of this would be purchasing comprehensive business insurance.
Risk transfer is a realistic approach to risk management as it accepts that sometimes incidents do occur, yet ensures that your business will be prepared to cope with the impact of that eventuality.
finally, risk acceptance involves ‘taking it on the chin’, so to speak, and weathering the impact of an event. This option is often chosen by those who consider the cost of risk transfer or reduction to be excessive or unnecessary.
Risk acceptance is a dangerous strategy as your business runs the risk of underestimating potential losses, and therefore will be particularly vulnerable in the event that an incident occurs.
Which one is right for my business?
It is important to take an objective and even-handed approach to business risk management, and not to underestimate the vulnerability of your enterprise.