Risk Management For Business – What You Should Know
As a business owner, there are many risks that need to be considered when it comes to your business. Risks are a natural part of running any business, which makes it vital to have the correct risk management practices in place.
Our latest blog looks at some of the best risk management practices, designed to help reduce the likelihood of risk to your business and protect against potential foreseeable – and unforeseeable – threats.
WHAT IS INSURANCE RISK?
Insurance risk covers a vast range of potential threats posed to your business that could cause financial damages.
It is vital for any business owner to identify and understand the types of potential risks to their business, in order to have the correct insurance policies in place to protect against these threats. A major part of this would be having the correct risk management practices in place.
WHAT IS RISK MANAGEMENT?
According to TechTarget, risk management involves identifying, assessing and controlling threats that could have an effect on business cash flow and profit.
These risks arise from a variety of external or internal factors, from accidents and natural disasters to management errors and technical issues.
A business needs to have the applicable risk management and insurance policy in place in order to reduce the risks and to put an effective plan in place to mitigate any potential risks that may arise in the future.
WHAT ARE BUSINESS RISKS?
There are four main categories of business risks to consider. Business News Daily defines these categories as:
- Operational risk
- Strategic risk
- Compliance risk
- Reputational risk
It’s imperative to have the correct procedures and policies in place to protect your business in all of these areas.
By looking at how these different areas of risk apply to your business, you will be able to come up with a proactive risk management strategy with your insurance broker.
Operational risks are risks resulting from a loss in the day-to-day workings of your business. This wide-ranging type of risk encompasses everything from your employees to your customers, including your equipment, property and the services and products you provide.
With the shadow of load shedding constantly looming, this category of risk mitigation is clearly at the forefront of priorities.
By setting out and following the appropriate risk management practices for your day-to-day operations, you can reduce your risk in these areas.
When it comes to strategy, there are a variety of risks that can arise. As the future is unknown, so too are the risks that come with it.
Strategic risks either affect or are created by business strategy decisions, and happen when your business strategy is affected by either yourself as the business owner, or by competitors in your industry.
DID YOU KNOW: According to a global survey of over 500 business respondents carried out by Deloitte, strategic risk has become a major focus. 81% of surveyed companies now explicitly manage strategic risk – rather than limiting their focus to traditional risk areas such as operational, financial and compliance risk.
Because you cannot apply for insurance against these types of risks, it is imperative that businesses are aware of their obligations – and of how they could be at fault, and ensure that your business is constantly aligned with what is required.
Reputational risk covers how a business is represented and protected in the public space. This area of risk includes data protection, security and privacy breaches, as well as other security or cybersecurity issues.
“Reputational risk is one of the more challenging risks to manage as it generally is a consequence of inadequately managing other risks. Threats to companies’ reputation and brand can be damaging to the point of sometimes being irreversible especially in the age of the global reach and use of social media. Therefore, the enterprise wide management of strategic risks and its resultant impact on reputational risk becomes increasingly more relevant in this new age.”
Elvin de Kock, Chief Risk Officer, Zurich Insurance Company SA
While you can insure against these types of loss, depending on the severity of the breach the damage done to your reputation may never be restored. This is why businesses should take the necessary steps to protect not only their systems and data, but also their brand and identity.
Do you have the correct risk management practices in place for your business?