If you want to run a successful business, you need to understand risk management. No matter what kind of business you’re in charge of, you’ll face different kinds of risks. These can include those that affect your finances, as well as those that will affect the safety of you and your employees. Modern business leaders need to be able to identify, evaluate and manage these risks carefully to minimise their impact and have success.
In this article, we’ll explore some of the most important risks to consider and look at how to identify and manage risks properly. There is plenty more reading available online, but from this article, you’ll gain a basic understanding on identifying and managing risks in your business.
Safety Risks
Safety risks are perhaps one of the most important to consider. Workplace accidents can cost a significant amount of lost revenue as well as fines. Ensuring that employees are able to complete their work safely not only reduces the chance of lost business, but it also improves employee well-being and effectiveness.
Modern workplaces are safer than ever, thanks to modern tools such as beacon and sounder devices, as well as protective equipment like safety glasses and masks. When considering safety risks, you need to think about the type of machinery used in your business and how often employees have to operate it. Do your employees drive as part of their job? Or are they lifting heavy objects?
Even if your business doesn’t involve heavy machinery, consider the different risks such as slips, trips, fires and exposure to the outdoors. Make a list of all the potential dangers that employees face and then evaluate each risk based on the seriousness and the likelihood of it occurring. Proper safety procedures and training can reduce risks, as can signage and lights to remind employees of the danger.
Often, you also need to consider safety risks for your customers or clients too. Are the products or services you’re providing dangerous in any way? Often, customers may find a way to misuse a product to cause harm, and this needs to be considered carefully when planning its design. Ensure that proper safety warnings are applied and that instructions on how to use the product are clear.
Compliance and Legal Risks
Businesses need to be careful to comply with local laws and regulations in the markets they operate in. Compliance risks are financial or reputational risks that a company faces due to violating laws or regulations. This can also open up the company to potential legal risks, resulting in the business and owner being sued which can be extremely costly.
Both legal and compliance risks can result in a business losing customers and facing issues with their reputation. Many companies which face heavy fines or sanctions are unable to recover, and either need to rebrand or shut down as the damage is too great. As a result, it’s incredibly important to be aware of local laws and how they can affect your business.
When planning a business, think carefully about each stage of the business plan and how it might run the risk of breaking laws. It’s always important to be aware of laws and regulations, especially ones that affect your industry. If you want to improve your chances of entering a new market, it may be a good idea to hire a lawyer and risk consultant to help you plan.
Financial Risk
Of course, businesses need to manage their finances carefully if they want to be successful. This includes carefully managing debt and carrying out proper financial planning. Financial risks can include currency risks in international business dealings and liquidity risk where a business suddenly needs cash but has illiquid assets.