How Risk Averse Are You and Does It Even Matter?
Bhavick Chauhan, of Pinnacle Business Management Solutions, is often asked “isn’t risk management just for larger companies?”
The answer to this is a resounding NO!
Any business wishing to benefit from proactive business solutions would be well advised to look at their risk management processes.
So what is risk management and how does it benefit businesses both large and small, and those just starting out?
Many business owners are so focussed on return on investment that they fail to evaluate and monitor the return on investment of time. We all fall victim to working IN the business as opposed to working ON it.
Risk management put simply is the process of looking at different functions within a business so as not to cause risk to property, reputation or a person.
Risk management allows a business owner to be proactive and to prevent rather than cure.
Tangible benefits of implementing a strategic risk management assessment are saving time due to working smarter not harder; the ability to make informed business decisions, such as where to allocate budget and aids delegation, as document management allows the speedy identification of files and resources. Staff are more involved and engaged when they can be left to perform a task without constant supervision.
Furthermore a business that is replicable and has structured logical processes becomes more saleable so adding value. This is of particular importance when selling a business, purchasing a business, planning for expansion or succession and possibly creating a business model which is suitable for franchising.
Consider these benefits and it becomes increasingly viable to adopt risk management as a necessary tool for the operation of a successful and competitive business.
Bhavick has many case studies that demonstrate such successes.
When advising the Planning Minister of Qatar on how to deliver his $60bn Transport Infrastructure Portfolio such an approach made the challenge much more scalable. The portfolio consisted of 350 megaprojects such as Highways, Railways, Airports, and Ports. One of the main objectives was to assure the delivery of the Portfolio i.e. make sure it was successful. In order to do this, the risks had to be identified, assessed and mitigated where possible.
One of the first tasks was to produce a Risk Register which informed the Minister of the risks and how significant they were to the delivery of the Portfolio. This gave vital information in order to make strategic investment decisions which would increase the chances of success. Working through the risks, most were eliminated or reduced by implementing mitigation measures. For the risks that were not able to be eliminated or reduced recovery plans were put in place so that, if a risk did occur, the reaction was quick so as to reduce the impact. This proactive approach resulted in fewer mistakes, an increase in efficiency, billions of US Dollars being saved and it significantly increased the chances of success.
These same principles of risk management can apply to any business, no matter how large or small, including yours. For small businesses if a risk is to occur, the impact of the risk is likely to be significant whereas a larger business may be able to absorb some of the impact. Therefore, risk management for small businesses is crucial.
Take the case of a small, independent recruitment company; the Risk Register we created highlighted that the IT system within the company was their largest risk. If the IT system was to fail the business would come to a standstill, which would lead to a loss of revenue because of the enforced downtime, potential reputational damage, the costs of unproductive staff and the cost of repairing the system under short notice. Knowing this risk enabled the director to make an informed decision to replace the whole IT system because the risk reduction and efficiency opportunities made the investment viable.
A Risk Register can be such a powerful tool to help businesses owners, make informed strategic business decisions. It is also helpful for identifying potential opportunities as well as risks.