Business Risk Management - Why Do You Need It?
Every business and organization, whether big or small, experiences one risk or the other. It affects their normal day to day operations and impacts the output and profits. Risks always have negative impact such as robbery or employee absenteeism. It differs from organization to organization. Risk causes uncertainty and huge losses in terms of money. Through risk management, businesses can identify, analyse, and control the factors that can leave negative impacts on them. It can save the business from loss and lessen the damage to some extent. Risk management involves proper investigation, evaluation and communication. Many organizations have risk management teams to look into the issues which can leave disastrous impact. There are a whole lot of sources that cause risk, internal and external. Internal sources are made up of negligence and slackness. The employees don't take the rules and regulations seriously. They leak the company's vital information. It arises from within the company or organization and is manageable.On the other hand, external sources are something which the company has no control over such as the nation's economic status, political issues and exchange rates etc. Apart from the stated, risks fall into the following categories:
i. Financial - fiscal dealings and accounts
ii. Calculated - organization's objectives, strategic plans and decisions
iii. Environmental -this falls under external source but every business and organization needs to be aware even though they have no control over it. It includes unforeseen climatic conditions and forest fires etc.
iv. Compliance -laws, rules and regulations. Every organization has a policy and standard procedure
v. Operational -day to day workings and functions
vi. Reputational -goodwill and image
The risk management team monitors and reviews all risks. It helps the organization grow and develop. Moreover, the team provides some security, which things can be controlled. It is in the organization to tackle whatever risk may come.
Role of Risk Management Team
Risks make every business and organization insecure over the uncertainty. They are not able to function fully, thus, they are not confident. This is the main reason they should have a risk management team. It will oversee all the uncertainties and risks. The risk management team:
- Investigates and identifies the potential risks
- Works to develop a plan or strategy
- Shares the risks with the senior members of the organization/makes the board aware
- Comes up with ways to minimize the effect of the risk or comes up with solutions
- Must understand the business or organization
- Work with the employees
- Make the employees aware of the situation
- Provide training
- Implement policies to help and restructure the organization
The organization should make available resources and funds for the risk management team to function well. The team sees into a lot of things such as policy making, strategic planning, extenuating risks and putting in place counter-plans. Risk management is not something that can be achieved over a period of months. It's an on-going process. Organizations must be ready to look for extra funds or resources because it's for their own good. They cannot risk it. Research has revealed that organizations that do not have a risk management team are in danger of collapsing. Most of the risks are avoidable and preventable. It has been seen that negligence and laziness have often led companies into great loss. Employees are not taken care of. They are not respected. The seniors have communication problems with the juniors. They are not able to reach out. Risk management teams handles internal and external matters. It takes everything into consideration then finds a lasting solution. The employers can sit back and relax as their work will be done. But they have to keep in mind that it's a continuous process. A company needs the risk management team throughout its life. This is because every day something new comes up. This is the same for risks; every day a new risk surfaces; organizations should be ready to tackle it. Overall, the role of the risk management team is to assess and manage risks. It has to identify, analyse and help the organization get through it. Sometimes, risks cannot be completely wiped out, but its effect can be reduced to some extent. It will provide relief to the organization. All members or employees of the organization should work hand in hand with the risk management team. It is for everyone's wellbeing and the organization as a whole. If everyone does their part, risks can be handled effectively.