This is a short video on identifying risks to your business which is part of our risk
management series of videos.
So, what is risk?
A risk is the likelihood of something happening as a result of a hazard or threat and the
impact it will have on your business activity.
Risk comes from uncertainty.
Its measured in terms of the likelihood of it happening and the consequences if it does
happen.
Every business has risks.
Just think for a moment about the hundreds of things that most business owners worry
about.
While few are predictable others are not.
You can however plan and control risks to a certain extent.
Some of these could be changing salary costs, taxes, overhead expenses, equipment and supply
costs.
Others are unpredictable and largely beyond your control such as the actions your competitors
may take; changing tastes and trends; disasters; industrial accidents and global economic factors
such as rising oil costs and increased costs of raw materials.
These events can and do happen to businesses all the time.
They can directly affect your day-to-day operations or impact on profits and result in financial
losses that may be serious enough to cripple the business or even bankrupt it.
It is not always easy to recognise the hazards or threats that can lead to adverse consequences.
For example, unless you have experienced a fire you may not realise how extensive fire
damaged can really be.
Damage to the building and its contents are obvious exposures but you should also consider
damage from smoke or water, damage to employee's property for example personal belongings or
tools and to property belonging to others for example machinery and equipment leased
from other businesses.
There's also the impact on the business during the time that it takes to get the business
back to normal and the effect on customers and staff who may not return when you re-open
the business.
The risk management process involves of a series of steps that when undertaken in the
right sequence leads to continual improvement in decision-making.
They are:- Step 1: Identify risks that could impact your
business.
Step 2: Analyse risks to assess their impacts.
Step 3: Evaluate risks to prioritise their management.
Step 4: Treat risks to minimise their impact and
Step 5: Develop and review your Risk Management Plan.
Risk management is not something you'll do only once.
You need to constantly monitor and review the strategies you're using to manage risk.
Risks do not always remain the same.
You may find that over time new risks are created; existing risks increase or decrease;
risks no longer exist; the priority order of risks changes, or risk treatment strategies
are no longer effective.
Risk management processes are all about reviewing all areas of your business to evaluate possible
risks, and then putting in place strategies to treat those risks.
Sound strategies can ensure business continuity; reduce insurance premiums; reduce your chance
of being sued; reduce the time your business may be unable to operate; allow for a plan
to replace key personnel; reduce the loss or damage to machinery and other equipment
necessary for the efficient running of the business and strengthen your chances of staying
in business.
There are limitations to the risk management process you should be aware of.
These include that risk management will not eliminate all risk.
Its impossible to plan for and treat all of the risks to your business.
Accidents can and will happen and this may lead to an incident.
Your ability to manage risk will be influenced by your resources, budget, time and the information
you have available to you.
Risks can be both internal and external to your business.
They can be hazard based for example chemical spills.
Uncertainty based such as natural disasters or associated with business opportunities.
That is whether you decide to accept or ignore them.
Businesses often fail to look at risk broadly enough and tend to consider the most obvious
things like fire, theft, and market competition.
The questions to ask yourself are:- What could cause an impact?
How serious would that impact be?
What is the likelihood
of this occurring?
Can it
be reduced or eliminated?