23 June 2017 0 Comments Posted By : Anna Johansson

4 Tips for Keeping Risk Under Control in Your Business

All businesses must take risks to succeed. However, many businesses are unprepared for the potential downsides. Businesses must have a plan for their risk management, or they’ll lose more than they’ll gain. These risk management steps can change the risk outlook for your business.

1. Develop a Strong Risk Matrix

How you handle the risk when it comes will make all the difference in the success of your company. A huge challenge in risk management is getting the message across to all departments.

"Depending on an individual’s role within each department, that department’s interpretation of risk and how it impacts the company as a whole will vary. For example, an asset integrity engineer and a health, safety and environmental (HSE) manager will respond to situations differently depending on the consequence that risk imposes on his/her individual department," says an article from the asset reliability management firm PinnacleART.

"The solution to this common challenge is to implement a corporate risk matrix that analyzes the risks of each department with the probability and consequence of each risk identified on one unified graph," the article continues. "Building on this process, a corporate risk matrix allows all facilities to be plotted on the same matrix in order to assess the risks across all locations."

A great risk matrix will span across all departments and will be simple to read and implement no matter the situation. The result will be greater collaboration, improved safety, less downtime, and higher business performance.

2. Invest in Business Interruption Savings

Your business may be interrupted indefinitely when disaster hits. Whether it’s a natural disaster, equipment breakdown, or any other bump in the road, having a plan for business interruption is essential.

Many businesses invest in business interruption insurance, which will help cover operating costs, and sometimes loss of profits, so that you can cover payroll and repair damages.

Investopedia warns that payments are not always guaranteed: "This type of policy pays out only if the cause of the business income loss is covered in the underlying property/casualty policy. The amount payable is usually based on the past financial records of the business."

In other words, insurance may not cover everything, so it’s wise to keep some savings on hand to pick up the slack. Just set aside a little extra every month.

3. Know the Acceptable Risk Level

Every organization should run frequent risk assessments that define how much risk the business can handle. It will determine the threshold for risk and advise you on the viability of a certain venture. By understanding this threshold, businesses can avoid taking on more risk than they can handle.

To define your acceptable risk level, The American Society of Safety Engineers recommends, "...the potential for harm must be reduced until the cost of further reduction is disproportionate to the benefit gained - to the level of as low as reasonably practicable .The criteria used to determine this level should include the organization’s...goals and the use of cost-benefit analyses of risk and their treatment; it also will be influenced by its culture and industry setting."

The ASSE goes on to say that an organization may mature over time, which will change the acceptable risk level. It’s important to continually run assessments and analyses to determine how that level may have changed and where their current risk assessment stands.

4. Keep a Solid Record

Legal requirements mandate that you record the happenings and assessment findings in any business with more than five employees. This record should identify how the damages occurred, the risk factors behind it, your plan for eliminating all risks and hazards, and any other relevant information found in your assessment.

"If your risk assessment identifies a number of hazards, you need to put them in order of importance and address the most serious risks first," recommends the government program Health and Safety Executive. "Identify long-term solutions for the risks with the biggest consequences, as well as those risks most likely to cause accidents or ill health. You should also establish whether there are improvements that can be implemented quickly, even temporarily, until more reliable controls can be put in place."

Not only will this record be useful when dealing with the insurance company, but it will also help you identify risk factors and management trends. You’ll learn from your mistakes and your successes, which can help you successfully avoid the same weaknesses throughout the course of your business.

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