Is your staff turnover too much to keep up with sometimes? Are your suppliers unreliable, and your lenders unpredictable? Could your company's data somehow be vulnerable?
If so, your business could very well be at risk.
So, how do you identify risks that threaten your business? And better yet — what risk management systems can you put in place to automate the processes of assessing and managing those risks?
Many risks that businesses face can be reduced through implementation of effective risk management systems. According to Project Smart, strong risk management processes could reduce problems encountered on a project by as much as 80 or 90 percent.
Kinds of Risks
Risks can be separated into several categories, although some will bridge more than one category. All businesses face financial and operational risks, as well as those that are market-related and strategic — how they are (or are not) tapping into the ever-changing industry in which they operate. Compliance risks can be associated more with particular industries (finance, medical), although general compliance risks such as data protection can cross a broad spectrum. Enrivonmental risks, over which businesses can have little control, can also vary.
Risk Warning Signs
There are a number of warning signs that can indicate that a business is at risk. These include:
- Financial position: Flat or reduced revenue, inability to pay invoices on time or to meet payroll
- Customers: Increased number of complaints, loss of regular customers, potential leads dwindling
- Staff: High turnover, low productivity levels, inability to fill key positions, loss of a key employee
- Market and competitors: Increased competition, declining sales, falling market share, need to reduce prices to drive up sales
- Management: Lack of executive commitment, ineffective decision making
- Suppliers: Reduced reliability
- Lenders: Reduced access to credit, poor terms offered
- IT: Disruption to critical systems, data integrity lost, downtime, user complaints, unauthorized access, exposure to malware or hackers
Risk Management Frameworks
For those just starting off, the Small Business Administration lays out a framework for first independently minimizing your own company's risk.
There are a number of risk management frameworks such as ISO 31000 that can be used by any organization to better manage its exposure by identifying threats and opportunities and that help to guide businesses on how to most effectively allocate resources that are available to limit or respond to hazards.
Also from ISO, the 27000 family of standards is widely adopted by organizations of all sizes. These standards are particularly useful for organizations that rely heavily on information technology. They enable organizations to apply risk management processes to improve the secure management of sensitive company information, taking into account people, processes and IT systems.
Benefits of risk management systems
Risk management systems can benefit business in a number of ways. These include lower insurance premiums, reduced risk of legal action against the business, less risk of financial losses and reduced downtime tackling the problem caused by a particular risk. No matter how small the business, every firm can benefit from sound risk management practices, providing it with better stability, which in turn leads to greater longevity.
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