Welp MagazineBusiness is fundamentally a game of risk and reward. Investments are made with the risk of not seeing a return, but the greater the investment the greater the potential payoff might be. The risk extends further beyond just the capital investment and company-wide success. It’s seen at an individual level, where employees come to work with the risk of injury or illness. There are several areas of risk that need to be managed in business, both for the good of the company and its employees. Let’s explore this in more detail.
What is risk management?
Risk management is the process of preparing for and navigating the threats and challenges, certain or potential, that could disrupt or even derail a business venture. The first step is often to identify areas of weakness or threat in a particular market or business environment. From this, you can then start to evaluate and mitigate risks as much as possible. Strategic planning and risk management usually go hand in hand and are both important for businesses whether they are new or established. Many types of risks need to be considered, which we explore further below.
Why is it important?
Risks have the potential to hinder the ability of a business to reach its objectives. Thus, identifying, assessing and addressing risks of all kinds is imperative for an organisation to give itself the best chance of survival and success. A business that lacks strategic thinking and proper contingency planning will quickly become vulnerable to things like changing market conditions and trends or will struggle to deal with operational challenges such as supply chain issues or global pandemics. With risks properly assessed, a business can also project future performance with much more accuracy.
If certain risks manifest or actually impact business operations, repercussions can be felt company-wide. For example, if an employee is hurt or injured in dangerous working conditions without the necessary PPE, there could be legal, reputational, operational and financial damage to the business. With proper risk management, assessments and solutions including PPE such as proper safety footwear, these types of risks can be mitigated to a large extent.
What risks need to be managed?
A business is vulnerable to a wide variety of risks, some more controllable than others. Strategic risks entail the state of a certain industry or market, whether it be the entrance of a new competitor or changing customer perceptions. Some sectors are more vulnerable to legal risks such as compliance or regulation changes. Every business will have to contend with financial risks, such as insufficient cash flow or lack of investment. Operational challenges are another common hurdle whereby the end-to-end process is threatened whether it be from supply chain issues, malfunctioning systems or damage to company property. Other less-controllable risks include natural disasters and political and societal instability.
