Does Your Business Have a Risk Management Plan?
If one of your biggest suppliers were to go bankrupt tomorrow, would you be able to sustain assembly of your products? Or if one of your biggest clients were to unexpectedly jump ship, could your bottom line take the hit?
If you think not, don’t worry because you’re not alone. An overwhelming number of companies today don’t have the proper risk management plan in place to protect themselves from these situations.
In fact, 65% of organizations admit to “being caught off guard by an operational surprise” within the last five years and only 25% believe their organization has a complete and formal enterprise-risk management process in place, according to the 2015 Report on the Current State of Enterprise Risk Management by the American Institute of CPAs.
But no matter if you’re a startup or a large enterprise, you must have a comprehensive risk management plan that identifies and manages potential risks to your business and a definitive set of solutions to minimize their impacts. This way, if your largest supplier were to go bankrupt or your biggest account were to go to a competitor, you would have a proactive plan readily available that would help your business quickly recover from the incident.
So how can your business go about developing a solid risk management plan? Below are some steps to help you get started:
- Appoint a Risk Management Officer
In order to create a successful risk management strategy, you need a risk management officer. This person is responsible for spearheading the plan and ensuring that each individual within the company understands what their role is in proactively managing risk.
- Take Stock of Your Business
The second step in building a comprehensive risk management strategy is assessing your business. Write down all of your critical business processes; for example, key suppliers, facilities, and staff members. Assessing your business will help you determine which aspects you couldn't operate without.
- Identify Risk to Your Business
Now that you’ve taken stock, the next step is identifying potential risks to your business. Think about all of the critical business processes you’ve laid out above. Now, think about things that could impact those processes, such as natural disasters, financial hardships, emerging competitors, and more.
- Prioritize Risks
After you’ve identified potential risks that could affect your business, it’s time to prioritize those risks based on two factors: the likelihood that it will happen and the impact it will have on your business. Once you’ve prioritized your risks, you can then outline ways in which to prevent them from happening as well as ways in which you can treat them.
- Review Your Plan
It’s important to regularly review your risk management plan, as things will change. After all, the industry in which you operate is constantly fluctuating as new products, services, and regulations enter the market. Reevaluating your plan will help you identify new risks and monitor the plan’s effectiveness.
Don’t put your business at risk. In today’s volatile market, it’s important to protect your business with a comprehensive risk management plan.