Adopting poor risk management or having no risk management processes at all in your business can have the same results. Risk management is designed to avoid potential known risks, as well as having measures in place to counteract problems should they occur.
If you haven’t looked at the risks in your business, formulated a risk management plan and put it into practice, or your overall risk management is poor, the following points could impact on your business. It’s important to be aware, as many risks can actually be avoided with diligence and by being proactive in counteracting risks.
#1 Adoption of New Procedures Is Poor
You might have identified some potential risks and changed the way things are done in the workplace to counter the possibility of that risk becoming a reality, but for some reason, staff are slow or reluctant to adopt these new procedures.
One of the main reasons this is the case is because the new rules and procedures might simply be too complicated and too bureaucratic. This usually means the new process is inefficient and cumbersome. This leads to workers taking shortcuts, which negates having risk management in the first place.
Before implementing changes, discuss them with your team first so any hurdles to the new process can be overcome before it’s implemented.
#2 – Over-Spending Can Occur
With zero risk management in place or a poorly devised risk management plan, one of the most common results is going over-budget on business expenses. True risk management should involve close scrutiny of financial matters as much as anything else. It also includes effectively budgeting for new projects and general business expenditure.
Also on the subject of money, if your business is not aware of or managing risks and problems do occur, these issues could potentially end up costing the business big time. This could be due to a loss of business income, projects costing too much, losing customers, or even fines for non-compliance with industry standards.
The bottom line of business is continually making a profit, but poor risk management can result in the opposite result.
#3 – Dissatisfied Customers
Customers are the lifeblood of just about every business so they need to be looked after to keep them coming back. While the majority of businesses make it a point to look after their customers, a lack of effective risk management can still lead to a trail of dissatisfied clients.
As an example, if you encounter problems with your delivery systems and customer orders are always arriving late because of some glitch in the system, those customers will soon become disenfranchised and move on to greener pastures.
While you can’t please every single customer all of the time, customer dissatisfaction can be minimised if potential risks are first recognised, then plans are put in place to ensure those risks don’t eventuate.
#4 – Your Business Reputation Could Suffer
The reputation of your business is everything and in these days of the internet and information spreading in real-time, any damage that your reputation suffers can spread like wildfire through cyberspace.
In today’s world, your brand is everything. You want it to be instantly recognizable for all the right reasons, and not because your business has developed a reputation for unreliability and incompetence. Risk management will help to elevate your brand into the limelight in a positive way.
You need to protect the reputation of your business just as much as you might try to protect your reputation as a person.
Help With Effective Risk Management
The first process of effective risk management is to first get together with your team and think of any risks that the business could potentially face on every level, then formulate a risk management plan. This plan should not only list those possible risks, but also include solutions to prevent incidents from occurring.
Hiring a professional risk manager is also a positive step, if your business is large enough and you have the budget for it.
A third step you can take in the risk management process is to purchase dedicated ERM software; software designed to assist you with implementing effective risk management procedures on every level, as well as monitoring your business processes at all times.
Risk management is an ongoing process of being diligent to avoid problems occurring to begin with.