Risk – Are you really sure about it? 5 Step guide to identify Risk for your Business!
RISK is one deadly word. A word that everyone is aware of but no one wants to accept. Be it business or personal, everyone wants to keep risk at bay. Nevertheless, one must never ignore the fact that businesses are always surrounded by numerous risks. While a few risks are visible and tangible, some are unprecedented and intangible. Few businesses are cautious about evaluating their risk proportions, some business are however, a little careless and need to do a quick analysis. It therefore, is pertinent to mention that businesses should always chalk out a risk management plan to outline all potential risks. Having said that, we mean it is better to be pro-active in identifying the underlying risks that could harm your business in the future. That also helps in chalking out a cost effective strategy to combat the forbidden in the future. This article is a guide to risk identification for your business.
A step-by-step approach is important to get the right things in place. Let us look at the five-pointers mentioned below to understand more.
1. Get Obvious and beyond - Business is always at the helm of obvious apprehensions such as declining market share, break-evens, profits, financial implications, capital management and resource utilization etc. It does not mean you ignore the obvious. It means you consider the obvious and go a step ahead. The first step in this direction is to assess your business, products and services and related factors that effect it. It lets you prepare for any fluctuating business scenarios in the future. I must say, you should plan to evaluate and think! Brainstorming and maneuvering through heaps of Excel Copies helps you draw Venn diagrams and gather the required knowledge to identify risks associated with multiple factors that impact business processes.
2. Identify the dreaded risks – After you have evaluated your business and probabilities well enough, next step is to go deep down further and find out dreaded factors and impacting risks. Now is the time to include all important and relevant factors for business risk, formulate risk management plans and fix any loopholes. It also is time for a session with your own self and to ask the following questions:
- 5Ws (who, what, where, when, why) and 1H (how) about risks that could consume your business
- Figure out if the threats are from within or from the outside
- What and who will be impacted in case of an emergency
Ask a lot of questions and brainstorm further to eliminate any missed opportunity.
3. Discuss and Evaluate – You may have done enough to identify the risk factors but it still is critical to evaluate the impact. When it comes to acting on factors affecting risk, it is always good to take advice and opinions from the expert risk management consultants, risk analysts, business professionals, stakeholders, and team members. It helps understand different perspectives and hence acts as a tool to evaluate risks that you might have overlooked.
We may follow excel as per the business requirement dependent on magnitude of risk and its factor but when there are hundreds of risk factors involved that are to be analyzed, then it is better to use proficient tools to save time, human effort and energy.
There are several utility tools available to “evaluate risks”. These tools come handy in:
- speeding up the evaluation process,
- building business scenarios
- bringing in more accuracy
- bringing certainty with decision making
4. Calculate risk - Once you are done with evaluation, create permutation and combination to calculate the risk by understanding the impact of multiple factors that affect the outcome for a business. There is no better way to use software tools easily available. These tools work with 100% accuracy in identifying the risk within seconds. This understanding of allied risks is certainly beneficial for your business as it helps in outlining a viable plan with certainty.
5. Create long term strategy – It’s hard to think about the worst case scenario for your business. But in reality this trick works wonders. By thinking about the extreme end of disaster you actually get a chance to work around smaller risks, which otherwise go unnoticed. A professional risk management is indispensable while devising business strategies across verticals like finance, accounts, production, logistics, and market etc. and in achieving a sustainable growth. It plays an important role in formulating a long term strategy for the business.
Let’s share opinion and comments in building a better understanding about “RISK” for a business!