Making Risk Management Effective
Effective risk management is one of the cornerstones of any company, but getting it right and ensuring its effectiveness isn’t easy. Risk management has come under increased scrutiny over the past year due to fluctuations in the global economy, particularly in Europe and the United States.
In order to make sure your risk management processes are effective, it’s first important to define the ‘risk’ itself. Everything that happens in a business can, in some way, be identified as a risk. Even the most basic business process can come with risks attached (e.g. the result of an action not going according to plan can technically be seen as a risk). For this reason, risk needs to be categorised. For example, a top level company objective not being fulfilled could be seen as a strategic risk. Whereas a failure arising from issues with technology or internal management and processes might be seen as an operational risk. Where facilities management is concerned, the latter holds far more relevance as it is something that can be assessed, measured and ideally prevented.
The key to successful implementation
The key to successful implementation is correctly defining ‘risk’ in a given situation. This will usually be the responsibility of the senior management who must assess the company’s risk appetite (i.e. how much they are willing to take risks) in order to build them into a strategy. Once the potential risks have been identified, it’s then important to order the risks in terms of severity and potential gain or loss. This evaluation of the various risks can then be plotted on a chart or map for reference, and can be factored into any strategic decisions moving forward.
Choosing the right approach to risk management
Once you have identified the risks and evaluated them, it is then important to look at them through the eyes of your company, assessing which risks are worthwhile and which ones aren’t. Naturally, a minor risk with a high potential gain is a good bet, where as something with high risk and low gain should usually be avoided. However, striking a balance between the two is extremely difficult and this is where effective risk management begins to shine. A good risk management strategy will highlight ways of transferring risk (i.e. outsourcing a contract to dilute responsibility) or avoiding the risk altogether. For example, if your company has a high rate of staff absence due to illness, this could well be considered a risk when taking on time sensitive contracts. A good way of minimising this risk would be introduce corporate wellness programs or give your staff easy access to good food, gyms, classes and other facilities.
Risk in business isn’t always about which deals to choose and whether you fly or fall, it’s about controlling the things that can be controlled, and finding a balance that ensures maximum productivity and effectiveness.