You might not realize it, but you are performing types of risk management every single day. You assess risk when walking across the street or deciding whether to go through a yellow light. You have to decide whether eating that burger is worth the heartburn later on or if being in the sun is worth the potential future health effects. You should also be assessing risk with your business. While it shouldn’t be as often as you do in your non-work life, risk should be something that you are regularly considering.
There are many types of risks that your business can face. They can be physical, such as property damage or injury, financial, or reputational, just to name a few examples. What is important is that you accurately assess possible risks and take the necessary steps to mitigate them.
For many of the risks that you might face, having the right insurance is your best option to protect yourself. Insurance will not print something from happening, but it will make sure that your business is protected financially. Lawsuits from personal injuries, employee injuries and illness, commercial property damage, and automobile accidents can all sink your business at a moment’s notice. Getting the right coverage, whether it be business liability insurance, workers’ compensation, or commercial property insurance, will make sure that you can weather those storms and still operate. Once you have identified all of your risks, then purchase an insurance plan that will protect you against them. Here are some important ways that organizations assess business risk.
They Take a Bird’s Eye View First
You might think that identifying every risk that your organization might face would be overwhelming. If you’ve never done it before, you may have to get the hang of it. The first thing experienced business owners, and organizational leaders do is take a big picture look at their operations. From there, they identify the most obvious risks that the organization faces. This can be the fact that they are located next to a river that is prone to overflowing or that they have a lot of walk-through traffic.
One of the biggest is making sure that the working conditions are safe. This is true for manufacturing and industrial plants and for quiet office spaces. There are always possible risks, such as the unsafe operation of equipment or just tripping over connection cords. As you find risks, you will train yourself to look for risks in other things, helping you drill down to assess as many risks as possible.
Think of Worst-Case Scenarios
You should never approach risk management with the mindset that some things aren’t likely to happen, so they aren’t worth worrying about. Unfortunately, even the most unlikely thing can happen, and it can leave your organization or business in serious trouble if you haven’t prepared or protected yourself against it. Confidence is a good thing when running a business, but it is the worst thing when assessing risk. Be pessimistic so that you are prepared for any eventuality, no matter how much the odds are stacked against it.
Get Feedback From Your Employees
Your employees are the ones who are on the ground doing the work every day. They are uniquely positioned to identify and assess any risks that you might be missing. You can’t always trust them to come forward with that information without prompting, either. They may think something is the way it is because you want it that way and not think too much about it. Provide anonymous surveys if you think your employees would want privacy, and take every suggestion into consideration, even if it seems unreasonable.
Remember, your employees can help with more than just physical and injury risks. They can see when something might leave you open to cyberattacks or if you are financially vulnerable in some way. Asking for feedback will make your employees feel more like part of the team and get them more invested in your company and vision.
Talk to Experts
There may be some risk that neither you nor your employees are qualified to identify. That’s why hiring experts to consult and guide you is so important. That investment will help to prevent headaches down the road. Experts can be insurance brokers, accountants, safety consultants, or financial advisors.
These types of experts can look at the history of your organization and how it is currently being run. They can point out possible negative trends and places where you can improve. If you do not have a background or education in accounting or insurance, then you may not be able to spot potential trouble ahead of time. By getting advice and acting on it, you can mitigate risk and keep your business safe from harm.
Internal research involves assessing risk within your workplace and organization. This involves observation of your operations and examining your procedures and finances. You always have control over what is happening within your organization, so this work can lead to change more quickly than external research. If you spot weaknesses and potential risks, then implement changes as soon as possible to close those gaps and keep your operation strong.
External research involves looking at risks that originate from outside of your business or organization. These can vary wildly, from changing market trends to competitor behavior to being located in a hurricane zone. You should always monitor what is happening to competitors and businesses that are similar to yours. That way, you can learn from their experiences and take the necessary steps to protect yourself. In many cases, these risks are systemic, such as governmental changes or economic downfalls, and it is very little you can do to prevent them. However, you can mitigate the risk by being prudent and making the right choices.
The last, most important step to take when assessing business risk is to act on what you’ve observed. Of course, you will need the right insurance, but it’s always best to have insurance but never have to use it. Create a risk management plan with your team to address any weaknesses you have found, and take action as soon as possible. The longer you are exposed to risk, the more dangerous it will be for your organization.