Risk Management

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Managing Risk

The reward for entrepreneurship is profit and loss from risk-taking. Hence, a more significant part of any business involves risk. This page seeks to explain how to manage this risk effectively.

Why Risk Management?

Risk management informs a person’s decision-making process. It means the process of reducing the adverse effects a thing has on your business. The first process of risk management is conducting sound research on safe business practices. After completing a study, it is crucial to align it with the prevailing circumstances surrounding your business at the time.

There are four risk management plans:

Identify the Risk

This process involves asking the question “what if”. It prepares your mind for the potential risks you are seeking to prevent. For instance, you have probably caught yourself asking:

‘What happens if my goods get stolen’ OR ‘my computers, machinery or equipment breaks down?

Risks also cover employees getting injured while working, a sick supervisor or director, a natural disaster, or a fire outbreak.

These risks are easily identifiable. Also, identifying them is the first hope of managing it.

Assess the Risk

It includes considering the likelihood of such and the consequences that may follow. To fight against risks, you have to assess the severity and nature of the risk. It would inform your decision to protect yourself or employees ahead of any occurrence or even manage it where it is inevitable. There are various means of controlling risks, and they involve trying to adopt control measures such as administrative and engineering controls.

Control the Risk

It is to lessen the likelihood of the risk and prevent any accident. You may control risks through the following process:
• Prevention. One can prevent certain risks through measures such as the use of safety and protective devices.
• Practising emergency procedures by providing protective gears, maintaining machinery, and staff training on health and safety.
• Transfer the risk. It means ensuring the business and employees against any risk. It also refers to types of trade that involves sharing of hazards such as partnerships and joint ventures.

Monitor and Review the Risk

It is the last process in risk management. We are involved with unknown risks every day; hence, it is essential to assess additional risks and review them. As a business owner, you must be vigilant and attentive to all business procedures. Emerging risks require new measures. Preventive measures include providing protective wears; safety devices; adequate training on machines and equipment etc. One must monitor the Safety procedures daily, and a routine check should be carried out from time to time, especially where the risk is significant. Finally, risks are unpredictable. It often discourages investments among business owners. Should not be the case. Often, with due diligence and precautions are taken, one can eliminate risks. A preventive procedure is the availability of safety materials, tools or machines which requires strict compliance for effectiveness. Hence, a disciplinary measure put in place may be to punish any erring employee.