What is risk management and why is it important?
From getting out of bed through to a large-scale construction project – everything carries an element of risk. The aim of any risk management system is to put in place measures to reduce the likelihood of the adverse event occurring and, if it does, to keep negative impact to an absolute minimum. Although this sounds straight-forward in theory, in practice it can be a complex and time-consuming operation. Businesses face a wide range of risks: from failure to work in a way that complies with relevant health & safety legislation through to inadequate data protection systems, not complying with relevant environmental requirements or leaving an excessive carbon footprint – it’s all too easy for a business to inadvertently be placed in a high-risk position. Robust risk management not only helps to ensure an organisation complies with the law, it frequently leads to better outcomes for clients, employees and profitability.
What does risk management involve?
Risk management is a multi-stage process which is suitable for any business. Initially, it’s necessary to identify what the main risks to the organisation might be. Once these are clear, it’s a case of auditing the systems which are currently in place, in order to identify any potential oversights or weaknesses. If there isn’t a risk management system in place, there will be a need to devise something suitable. Once a system is created, it then needs to be implemented, monitored and evaluated in order to test its effectiveness. Monitoring and evaluation is an on-going process – as businesses evolve and grow, there is a need for risk management systems to grow with them. Periodic revisiting of the systems ensures they stay relevant and effective.
Why is risk management important to businesses?
Pro-active risk management has a number of advantages. The main benefits are:
- A reduction in the risk of inadvertently breaking the law! Health & Safety and Data Protection, for example, are two areas where businesses are required to comply with various pieces of legislation. In these areas, risk management focuses on ensuring compliance, helping a company to operate in a legal manner. This not only reduces the potential risk of a criminal prosecution should an adverse event occur, it also helps to reduce the opportunity for costly litigation.
- A high-calibre risk management system can have a positive impact on your insurance premiums! Because risk management reduces the likelihood of adverse events, it’s welcomed by insurance providers.
- Greater corporate resilience. Part of risk management involves considering not only how to reduce the risk of an adverse event, but also in planning how best to minimise the negative consequences should an adverse event occur. Contingency planning enables a company to “bounce back” rapidly following a set-back, reducing the risk of severe consequences.
- Improved employee and customer care. It’s vital to protect your customers, your workforce and the public when they’re on your premises and/or engaged in activities for which you take responsibility. Risk management improves safety, ultimately resulting in better ways of working.
- Greater sustainability and potentially more profit. An organisation that’s pro-actively managing its risk is a forward-planning enterprise that’s safeguarding its assets, be they physical or human. This, in turn, reduces the chances of key risks materialising as well as protecting the business should the worst happen.
What are the possible consequences of not having a risk management system in place?
Some of the possible consequences are given below:
- Without a risk management system in place, it’s very difficult to work out whether what you’re currently doing is sufficient to ensure compliance with relevant legislation. In some cases, you could be operating illegally and be completely unaware until an adverse event and subsequent investigation exposes the problem.
- A lack of risk management leaves an organisation vulnerable to adverse events. If you don’t know how you’re going to respond should disaster strike, there’s a risk of ending up without the appropriate resources or planning to deal with the emergency.
- You could lose customers. Particularly when it comes to matters such as Data Protection, customers are highly likely to desert should an adverse event become public knowledge.
What risk management support can JVR supply to your business?
JVR provides a cost-effective, holistic risk management service that can be customised to meet your individual requirements. We offer FREE GAP analysis, enabling you to be clear regarding the main areas of weakness within your current risk management systems. With this information as a baseline, we are able to devise low-resource solutions which make a measurable, positive impact.
Why chance the problems which poor risk management can bring? Get in touch to find out more.