All businesses face risks that could pose threats to their success. Risk is defined as the probability of an event and its consequences. Risk management aims to determine what could go wrong, assessing which risks should be dealt with and implementing policies to deal with those risks. Businesses that have evaluated their risks will be better equipped and have a more cost-effective way of dealing with them.
Most risk management techniques follow the same basic 5 step model:
- Identify the risk
- Analyze the risk
- Prioritizing the risk
- Monitor the risk
- How to manage risks
There are four ways of managing each risk that you have identified. You can:
Accept it
For instance, you might decide to accept a risk because the expense of eliminating it completely is too costly.
Transfer it
You might determine to transfer the risk, which is usually done through an insurance policy.
Reduce it
Also known as “loss control” by introducing new safety features to reduce the frequency or severity of losses, for example adding fire protection, safety inspections and engineering.
Eliminate it
By modifying or changing the way you are operating. For example, using cordless equipment to get rid of trailing cables and risk of slip and fall.
Good risk management can improve the quality and returns of your business. Choose the right insurance to protect it against loss!
