Risks are happenings that occur in business that have the potential to derail business strategy if they aren’t properly mitigated. One of the healthy habits of successful companies is proper risk management. As organizations are continually evolving, the risks involved in their business are evolving simultaneously. As a result of this, it is imperative to employ proper risk management measures.
12 effective ways to manage risk in business are highlighted below:
- Have sufficient insurance coverage and carefully review the insurance policy terms yearly to make sure you’ll be covered, should any contingencies arise.
- Invest in employee education and regular trainings for them to be up-to-date with the latest happenings in their profession. Also record all staff trainings in a document.
- Give all team members sufficient freedom to express their concerns about company policies and practices.
- Risks should be continually re-assessed because factors like market conditions, geopolitical situations, volatility levels, physical environments and financial strength of counter-parties continually change. It is vital to re-assess risks in order to be able to make decisions based on projected risk levels.
- Have written employee guidelines and industry standards that ensure that employees uphold the ethics of their profession; and review these standards and policies with all staff, at least once in a year. While creating this list of guidelines, it is advisable not to include overly strict and unrealistic requirements that would be difficult to enforce on a consistent basis.
- Conduct random checks to ensure that all team members carry out their tasks the way they should, and ensure that there’s a working system of communication and documentation within the firm.
- Client confidentiality is important. Set standards and measures to protect client confidentiality.
- Invest resources into activities centered on quantitative risk analysis and basic risk control. Though this might be expensive, it is still cheaper than the costs that could be incurred as a result of lapses in risk management.
- Don’t let the company and team members act outside the scope of their professional qualifications and insurance coverage. For instance, while some staff might not be certified lawyers or doctors, they might have some knowledge on legal and medical matters. It would be risky to obtain professional advice from such staff on delicate matters. It would be far safer to get such advice from a certified professional.
- When necessary, classify your full-time employees from independent contractors.
- Always make sure that all agreements for services to be provided to all clients are clearly and expressly stated in a written document. The written document should show the scope of services to be provided, fees and costs to be incurred.
- Ensure that the management, all staff, the corporate board of directors and senior business executives are always aware about company risks, and the practical features of effective risk management.
All the best in your business!