Risk Management is Your Business Armour

"You wouldn't go into battle without your armour; so you shouldn't run your business without managing risks."

The exciting thing about running or being part of a business is the spontaneity that change brings. With this spontaneity however, comes the possibility of negative occurrences which could adversely impact you and your business. The very obvious one we can all identify with is the Covid-19 pandemic.  Depending on your preparedness and the nature of your business, businesses have generally done well, maintained an inflow of cash to sustain their business, or are struggling. Other businesses have also had to close.

In the manufacturing industry, managing risks is critical to getting your products out just-in-time and right-first-time. For service providers, not managing risks could severely impact the quality of the service you provide.

While you cannot forecast every single occurrence which could impact your business, having an anticipation mindset is key to making sure your business is  prepared for any eventuality. Risk management is essential preparation for any business that wants to succeed.

There are some key risks to look out for:

Market Risks - these include chances of losses due to factors affecting the market that a business belongs to. These include economic recessions, interest rates, ForEx, political unrest etc.

Brand Risks - these are risks to your business' reputation. An example is negative reviews from customers.

Legal Risks - these result from failure to comply with laws and policies in your business environment. Examples are data fraud, misuse if customers data etc.

Financial Risks - these are chances of losing money on an investment or business venture. It also includes credit risk on credit offered to customers.

Operational Risks - these are threats to your business continuity due to errors caused by internal/external processes such as force majeure, logistics, IT.

To effectively manage risks, project managers, business owners and risk managers need to understand the criticality of a risk.

The criticality is a combination of the likelihood of the risk occurring and the impact to your business or project. Understanding the criticality helps business owners decide on how many resources to allocate to mitigating risks.

The Covid-19 pandemic has posed an operational risk to businesses. If businesses have not reviewed risks and planned mitigation, the time to act is now.

Risk management applies to every business and every sector. Businesses are better off investing in a risk management process, than firefighting unplanned occurrences. Across the sectors I have worked in - oil and gas, telecommunications and aerospace - risk management has always been a key weapon in the arsenal of successful businesses. Business owners, wear this armour and be ready for whatever comes!