Risk management is crucial in managing business operations, making sure that things are in place to deal with anything that might halt or hinder streamlined systems. Putting the right risk management strategies in place is beneficial not only to mitigate risk in general but also to add a layer of protection to a business. Risk can be treated as something which could threaten both business operations as well as the ultimate success of the company.
Four risk management strategies to implement in your operations in your business include:
Risk management strategy
1. Avoidance
To avoid risk, things need to be prepared as such. Risk avoidance in risk management means putting safe-guards in place to ensure that something goes wrong, there is something that can mitigate the damage and minimise any harm caused. This can be for business operations, financial health, the well-being of employees and a number of aspects in a business.
For example, having a fire-safety plan is contingency against the harm of staff members if there’s a fire. Contingency planning requires foreplanning and full, comprehensive thought into how things might go wrong and how to draw up a solution for the possible negative scenarios.
This means considering all the information at hand, and researching possible outcomes if something happens. From there, analysing the information and coming to a point of solution is crucial. It’s also important to have active communication around the risk and the solution across the relevant parties.
2. Acceptance
There are risks which are not worthwhile looking for solutions or changing operations to try and avoid or mitigate. Risks which require acceptance are generally more inconvenient than significantly damaging to the company.
The choice to accept risk is a decision that should only be made after analysing all the possible information. From there, it’s important to conclude that the risk is not worth trying to avoid.
Once accepting that risk is not worth resolving, it’s important to consider any contingency plans against the possible fallout of accepting. Plans to deal with the result if the risk becomes a negative scenario should also be considered.
3. Mitigating the risk
Risk mitigation is the process or reducing the risk if a scenario turns negative. It goes hand-in-hand with risk acceptance. This is because it is often linked to trying to minimise the outcome of an unfavourable situation.
Risk mitigation should occur in conjunction with precautionary strategies and risk preparation. This is because it is so closely linked to the possible negative outcome. For example, having contingency plans as part of staff training is a part of risk mitigation. It not only trains staff how to react in a scenario but also positively enforces that there is a plan if the “worst case scenario” occurs. This also helps offer peace of mind to the workforce.
Risk mitigation is different from risk avoidance because the process is not trying to eradicate the risk entirely. Rather it’s the approach of reducing the impact the risk might have.
4. Risk exploitation
Risk in most cases is worth trying to reduce. There are some scenarios, however, where risk might come with the possibility of positive opportunity. Looking for ways to exploit risk and explore opportunities to reward from risk can be a fantastic way to deal with risk, but if things might not go in the way hoped, it can be difficult to circumnavigate the negative consequences.
Risk exploitation is most common in financial strategies and can yield profitable scenarios if things go according to plan.
