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Risk Management in the Real World

Risk management has been a buzzword in the world of (big) business for some time. But, in a competitive and ever-evolving world, it has become equally essential for small businesses to incorporate risk management strategies into their daily operations.

As Gary Cohn, Vice Chairman of IBM, famously said, “If you don’t invest in risk management, it doesn’t matter what business you’re in, it’s a risky business.”

He’s right. Learning how to manage the different types of risk your business is exposed to – and implementing the appropriate processes, structure, and governance to detect and deter them – is vital if a company wants to survive and thrive.

What is risk management?

At its core, risk management forecasts the potential for negative consequences and predicts how these might impact a business or situation. These risks are both internal (operational, financial, human resources) and external (natural disasters, supply chain, market disruptions, government compliance).

During this process, managers identify, analyse, prioritise, monitor, and respond to risks. Depending on the business’s tolerance levels, management can accept the risks or deny them and choose an alternate approach.

Applying risk management to all businesses, big and small

Common risk in business

Whether you are a one-person operation, a small start-up, or a large enterprise, risk management applies equally.

Personal business

The biggest risk to a personal business, such as a financial advisor, freelance worker, or private contractor, is key person loss. This happens when the owner cannot work and the business grinds to a halt. The subsequent loss of income puts them at substantial financial risk as well as operational risks and business interruption.

Small business

One of the biggest threats to small businesses is the financial risks brought on by uncertain economic and market conditions. This affects everything from business continuity to cash flow, payroll, debt repayment, and purchasing power. Strategic risks come from a lack of planning for each stage of the business life cycle and not considering shifting external environments, like technological advancements and a changing competitor landscape.

Enterprise businesses

The larger the enterprise, the more risks it is exposed to. The primary risks, however, are related to the financial, strategic, and operational sectors. Financial risks include increased costs, a decline in revenues, and business disruption due to natural and political disasters and major macroeconomic shifts. Some businesses take strategic risks knowingly, such as higher-risk, higher-reward ventures.

An important risk to have on your radar if you’re part of an enterprise is the SA government’s Broad-Based Black Economic Empowerment (B-BBEE) initiative. A lack of certification creates reputational and financial risks, impacting contracts, licences, funding, and tenders from government and private companies.

Prioritise Managing Risk for a Secure Business

If you find risk management as fascinating as we do, now’s the time to secure the hatches with our Foundations of Risk Management course. We’ve partnered with Wits Business School to provide an accessible online course in the essentials of risk management. With a maximum time investment of just six hours per week, you can protect your business and avoid unnecessary risks. To learn more about the Foundations of Risk Management online course, read more here, and start tackling business risks today.

3 ways to future proof your career in an online world

Read the top 10 key findings from the survey here: MasterStart Workforce Barometer Report 2018.

The world is constantly changing, with new age technology engulfing the planet. It seems like everyone is glued to some sort of screen these days. It can be daunting to keep up with the times, and the new gadgets that help make life easier.

Have you noticed the impact of artificial intelligence or robotic automation in your industry? You are not alone! Our study has shown that a majority of employees are wary of artificial intelligence and the process of automation.

Fewer than 20% felt comfortable sharing their workloads with robots or having processes automated by AI. Yes, there is a real possibility that automation will take over human tasks, as organisations look to keep abreast with the ever-changing technological environment. However, we do have access to tools to “future-proof” ourselves against this.

Future-proofing

In order to future-proof your life and your job, you need to remain current in your industry.

Our recent MasterStart South African Workforce Barometer revealed that just 23.8% of our workforce felt completely confident their current skills will guarantee them employment in 10 years’ time. This suggests that people have a high awareness of the unprecedented pace of change and need for nimbleness and adaptability.

The constant learning of new hard and soft skills will entrench the flexibility necessary to manage the breakneck pace of the workplace and ensure sustained relevancy. Given the competitiveness of the market – which will only increase with the rise of automation – having a sought-after skillset is the best way to guarantee ongoing job retention.

Anyone, Anywhere and Anytime

The beauty of online learning is that it is on your own terms. Our study has shown that almost everyone (95%) believed that lifelong learning would help them remain relevant in their careers.

Of those surveyed, who have studied online, listed the following as the “big gains”:

1. Tangible results:

A salary increase, promotion, skills (to be more marketable), more experience and more opportunities.

2. Higher performance:

Better knowledge, keeping up-to-date, a better understanding of the way the workplace works, faster completion of tasks, and having to employ fewer people as they had the skills themselves.

3. Better motivation and soft skills:

Being better at dealing with people, the ability to explain concepts to clients, and overall improved communication skills.

The team here at MasterStart is dedicated and invested into a life of learning. We believe that the secret to current success and future wealth, lies not in the piece of metal in between your fingertips, but in the knowledge and experience, you gain from your life.

Professional facilitators make learning a breeze and continue to support you throughout your journey with us. Stamped with an honourable seal from the University of Stellenbosch Business School.

Read the top 10 key findings from the survey here: MasterStart Workforce Barometer Report 2018.

Are you aware of your businesses risks?

business risk management

Risk management can be a laborious task, requiring the mental strength of a chess master calculating his next dozen moves, hoping it will bring success. While assessing your company’s activities, projects and strategies against all risk factors may be a necessary exercise, it is important to look at it as a double-edged sword. When looking at the launch of Facebook, many risk managers would’ve advised against it, with industry leaders MySpace and Friendster controlling the market.

So why do we do risk analysis?

Risk management is in essence project management. It increases the chance that your endeavour will be a success. By forecasting and predicting risks to your company’s ventures, you are able to answer questions like: what are the legal liabilities, what are the threats from project failures or what credit risks do we face? It may also help you minimize the impact of foreseeable but uncertain events like accidents or deliberate attack from a competitor.

A risk management plan cannot help you identify uncertain or unpredictable events but rather reduce the impact of an unfortunate event, such as a natural disaster, with a suitable crisis plan.

Risk management varies across the functions within an organisation as each business unit comes with its own set of unique threats, therefore, any plan developed needs to be approved by the appropriate level of management. For example, you wouldn’t assign a marketing manager to develop and monitor a risk management plan for the protection of computers against a virus risk.

The following are common risk management failures, in various business functions:

Management ignoring warnings

Often this comes down to a lack of proper reporting procedures, as opposed to blatant disregard from a manager. Employees will regularly report a possible dangerous problem that could lead to personnel getting hurt, or note that an employee isn’t operating equipment safely.

Managers in haste to an important meeting could note your concerns but later forget to follow up, leading to equipment damage and/or personnel that could’ve been avoided. Where necessary, a simple reporting procedure that ensures safety and security concerns are addressed and resolved, within an acceptable time-span, would help eliminate human error.

Routine quality checks

Much like the recent Tiger Brand’s listeriosis debacle, the lack of routine quality checks can result in devastating losses of stock, market share or worse – customers!

When thinking of quality checks you need to assess yourself honestly against the following questions: when was the last time that a qualified professional inspected your equipment? How do you know that your equipment isn’t about to malfunction?

Without these important checks, you increase your company’s risk, when a thorough plan to have periodic checks can easily help you maintain a low-risk profile.

Late-running projects

Prevention is better than cure, wouldn’t you agree? An integral part of any project management task should be risk management. An experienced project manager, will try and predict any potential threats to a project. They will put plans in place to overcome them, unknowingly developing and implementing a risk management plan.

Implement scheduled “risk workshops”, where team members can discuss any potential risks that they foresee arising from new developments in the project.

Risk Management advice:

There is such a wealth of information online and published. Create a network for yourself, of people in risk management, so that you can learn from other organisations. Keep your focus on the value of risk management and not just the process, ticking boxes and complying – the point is to reduce our risk and improve performance. Be innovative and creative – there is no blueprint for managing risks.