Today’s dynamic and ever-changing markets mean that companies are constantly exposed to unforeseen risks. These may come from automation, environmental problems, geopolitical decisions, and changing regulatory frameworks. How does a medium or large company go about improving its risk culture and risk management strategies? In this article, we explore some key things to keep in mind for businesses and business managers.
Looking into new ideas
One good way to minimize risk is to consider all the available options for your business. For some companies, this might mean diversifying your portfolio to respond to changing customer demands—for example, by investing in cleaner sources of energy. For others, this might mean diversifying into different kinds of hedging or risk management strategies. This would require identifying the main source of costs for your business. Is your business paying too high a premium or insurance? Are there circumstances that pose an extreme risk for your business? A good way to deal with and identify these issues is to look at new opportunities. When faced with new ideas, you need to consult different specialists such as lawyers and consultants. For example, a captive insurance attorney might be the right person to talk to for you. They may advise you to take charge of your own risk by investing in a captive insurance company.
Improving your company from the bottom up
Something that is not discussed often enough in the risk management literature is the importance of improving the quality of your company. This might mean improving the quality of products, developing more stringent regulatory standards, creating a holistic compliance guideline, or generally focusing on the needs of your customers. Usually, ethical companies that have formed strong connections with their local communities are more resilient to risks. In terms of strategy, your company could achieve this by investing in a strong marketing team.
Dedicating resources to risk management
Risk management should not come as an afterthought for your company. If it is to be a core focus, it needs to have adequate resources dedicated to the practice. This means thorough training for all managerial levels and the development of a risk management strategy. Part of this includes hiring consultants, trainers and risk analysts. Most importantly, you need to purchase good risk management software.
Changing company culture
Company culture is often not ideal for risk management scenarios. To cut risks, your company should have an open culture of communication. This aids multi-level decision making in the face of a crisis, keeps up team morale, and saves time lost due to miscommunication. To do this, your company needs to have strong leadership. Crisis response scenarios need to be played out so that each employee is well-versed in the protocol in times of crisis.
Overall, risk management is not to be taken lightly. It encompasses almost all aspects of your business. Effective risk management requires introspection, expertise, leadership, and strategizing. It is important to remember that active risk management does not only avoid costs, but it also adds value to your company.