If you’re running a business, then you’ll inevitably be faced with risk. This risk might take many forms – and having a strategy to identify and mitigate it is critical. While a business might, in the short term, get away without such a strategy, in the longer term, such a business will be found out with serious consequences. ONS data shows 345,000 firms across the UK shut their doors in 2022, up 5% on the previous year and the highest figure since records began in 2002. here is how you can manage risk as a business to achieve success
Identifying Business Risks
Individual risks might be financial, operational, legal, or reputational. Dealing with different kinds of risk often requires a different kind of approach. A SWOT analysis is a go-to way to identify risk for many organisations. This involves identifying Strengths, Weaknesses, Opportunities and Threats, and (in many cases) setting them out in a report.
Businesses might also workshop their risk assessments. This might mean getting a diverse range of decision-makers and stakeholders into a room, and brainstorming ways that things could go wrong.
Evaluating Risk Impact and Likelihood
You’ll need to be aware not just that a risk exists, but how serious and likely it is. You can use a combination of qualitative and quantitative methods to make the appropriate determinations.
It many cases, the most appropriate way to deal with the problem is through a risk assessment matrix. This is a table whose rows represent the likelihood of something happening, and whose columns represent the severity of the potential consequences.
Developing Risk Mitigation Strategies
You might use a range of strategies to drive down risk. Diversifying products, investments, and your workforce might help you to avoid serious losses. Don’t put all your eggs in one basket, in other words.
Your risk management strategies should be tailored to fit the needs of your business. After all, every business is different, and a customised risk management plan will do a better job of identifying particular risks than a one-size-fits-all approach.
Legal and Regulatory Compliance
The law poses unique forms of risk. You’ll need to be well advised of the regulations particular to your industry. For example, if you’re letting out property, then you’ll want to be aware of the Renter’s Reform Bill, and its ban on no-fault evictions.
Maintaining high professional standards is essential, as failure to do so can lead to serious legal repercussions, including professional negligence claims. These can significantly impact the financial stability and reputation of your business.
Implementing and Monitoring Risk Management Plans
Risk management isn’t a quick fix. Rather, it’s an ongoing process. A regular cycle of strategising, implementation, and review will help to ensure that you’re on top of new threats, and that you’re taking effective action against old ones, too. You should be aware of your KPIs (Key Performance Indicators), and you should conduct regular audits to ensure that you have the right information about the state of the business.
