Implementing a successful risk management strategy won’t happen overnight. Here are some tips to get you started so you can keep your company safe.
Looking to boost business growth? Enterprise risk management has the power to take your startup to new heights.
However, implementing a strong risk management strategy won’t happen overnight.
Read on to find out some solid tips to get you started so you can manage risk and foster sustainable growth.
1) Define Clear Goals and Prioritize
In theory, a risk management strategy should cover every possible risk. This is not feasible in practice due to practical limitations. You simply don’t have the time, manpower and funding resources to manage every type of risk.
Instead, limit your scope to your main business goals. By building your risk management strategy around your specific business focus, you can achieve your first risk management goals.
Everything starts with specific, achievable goals. For example, if your company stores and trades electronic devices, one of the first risk management concerns would be warehouse safety. This goal would include parameters to protect your stock from fire, flood, and theft.
Above all, risk management should be practical. As it’s impossible to cover every possible risk, prioritize the most significant ones first. Identify what risks affect your operations most, and take steps to manage them.
Identifying the main risk criteria is not something that happens overnight. This is a process that is outright impossible to complete before a company is launched, and it remains a challenge during maturation.
2) Identify the Benefits of Risk Management for Your Company
Enterprise risk management is notoriously difficult to value through the usual investment evaluation methods. You can’t use return on investment, return on capital, and other traditional investment metrics to measure the benefits of risk management.
This means that your company should aim to build a risk management strategy that is tied to other business goals. These goals should not be directly tied to investment metrics.
Many businesses identify the value of enterprise risk management in four categories:
- Shareholder value
- Process consolidation
- Process Improvement
- Total risk mitigation
Shareholder value is straightforward, and perhaps the one most closely tied to funding. It’s simply how much-perceived value your risk management offers to shareholders.
Process consolidation refers to any business processes that can be merged and combined via risk management. Redundant processes and repeating business loops increase risk and waste vital funding.
Process improvement refers to any efficiency improvement that happens because of risk management. For example, a good risk management strategy would include steps to eliminate the “silo mentality”.
Silo mentality refers to the tendency of departments within a company to avoid sharing information with other departments.
3) Measure Performance
You can’t have risk management without accurate metrics and progress reports. As your business evolves, you need to be able to identify new risks and measure what works.
There are two ways to deliver progress reports. You can report risk either by the progress of your risk management strategy or by the total material risk. Risk owners should issue updates about the risks around the main business activities.
Risk management is also essential for regulatory compliance. You can use the same metrics that you use to measure your enterprise risk management performance for governance, compliance and strategic planning.There are even companies that have developed GRC software to make this aspect of your business less time consuming and tedious.
Good reporting goes beyond risk mitigation and helps define your risk management strategy in the long term as well.
4) Identify the Right Risk Management Strategy Framework
Across markets, different companies adopt different frameworks and risk management standards. Before deciding what is best for your company, you should research and understand the different frameworks available.
Your business has to comply with any risk management regulations and standards. However, beyond that, there are many ways to identify and manage risk. You don’t have to limit yourself to a single approach, even if that’s the norm in your market.
Risk management practices are not static. They evolve over time as markets shift and new trends become stronger.
All risk management frameworks have one goal in common: to balance risk with return. With that in mind, you can develop your own risk management strategy that balances risk with the return for your company.
Don’t follow blueprints blindly, and don’t try to copy your competitors without first assessing your own risk.
5) Leverage Existing Capabilities
Even if you’ve just launched, chances are you are already doing some form of risk management within your company.
Many risk management controls are blindingly obvious, and others are byproducts of existing processes.
Before planning your strategy, you have to take stock of what you already have in place. For example, you might already have controls for worker injuries, environmental hazards or IT disruptions.
These are valuable assets that can help you plan your risk management strategy more efficiently. The challenge here is to scale up individual practices into an enterprise-wide risk management plan.
6) Stay Up To Date
In today’s digital world, everything evolves. Markets shift, business goals evolve and trends change. Regulations adapt to those chance, making risk management an ongoing process.
You can’t just set up a risk management strategy and forget it. Your business needs to adapt to new chances. For example, if your business grows fast, you might face new risks from scaling up your operations.
Even if your business is stable, shifts in the market and new technologies can create new vulnerabilities. You can offset this problem by keeping your risk management up to date.
Risk management goals should be evaluated every few months to ensure they are still serving the best interests of your company.
7) Partner with Risk Management Strategy Experts
Developing and implementing an effective enterprise risk management program requires expertise. Even if you have intimate knowledge of all the risks your company faces, you are probably still lacking hands-on experience.
By partnering with a dependable third-party expert, you leverage decades of risk management experience. Determining and managing risk is a collaborative process, and you need to work closely with your employees to manage risk. The expert’s help will be instrumental in facilitating collaboration when it comes to risk management.
If you are having trouble controlling risks, consider working with the risk control experts at Poms & Associates. With decades of collective experience, their risk management experts can help you find and mitigate what risks your business faces.
8) Remember That You Are Not Alone
Finally, remember that while growing a business might seem like a huge task, you don’t have to go at it alone. While you might have strong competition in your market, there are always business leaders and industry experts ready to reciprocate and share their expertise.
Check out Jcount’s tips category for an incredible wealth of sound business growth and risk management advice for companies of all sizes and scopes.