There’s a lot going on in the world and the risks are changing and evolving rapidly, making it difficult for many companies to adjust and manage the risks they face effectively.
Some risks that barely registered a decade ago now pose serious challenges to many businesses. There are novel technological risks with new threats constantly arising in the cyber world, economic and market volatility, terrorism, regulatory and legal challenges, supply chain vulnerability and political uncertainty.
These risks can all be real for any business and it’s important that you and your manager sit down and try to identify the potential threats that could affect your operation, assess their likelihood and how your organization can reduce the effects of these events.
By understanding potential risks to your business and finding ways to minimize their impacts, you can ensure that your company recovers quickly after an incident.
Of course, risks vary from business to business and across industries, so there is no one-size-fits-all risk management plan. However, the methods for identifying risks and making a management plan are the same.
This guide outlines the steps involved in preparing a risk management plan and a business impact analysis for your organization.
Identifying risks
The first step in preparing a risk management plan is to identify potential risks to your business. This will help you develop appropriate strategies for dealing with them.
This stage requires thinking outside the box and not looking at the obvious.
- Think about your critical business activities, including your key services, resources and staff, and things that could affect them, such as power failures, terrorism, a cyber attack that incapacitates your network, natural disaster and illness.
- Brainstorm with staff from various parts of your organization – operations, accounting, legal, logistics and other sections – to identify as many potential risks as possible. Don’t leave anything on the table because it’s too outlandish.
- Review your business plan and think about what you couldn’t do without, and what type of incidents could affect these areas.
- This includes considering what you would you do if:
- You lost power supply.
- You had no access to the Internet.
- Important documents were destroyed.
- Your facilities were damaged or you were unable to access them.
- A key supplier was unable to deliver product to you.
- The area your business is in was hit by a natural disaster.
- Consider the worst-case scenario. This could be the result of several incidents occurring simultaneously or as part of a chain reaction. For example, your cold storage warehouse could lose power, which could cause perishables to spoil, which in turn could lead to your restaurant clients’ customers contacting food poisoning.
Formulating responses
Once you’ve identified risks for your business, you should assess the likelihood that they could occur.
A good strategy is to rank risks based on which ones would cause minor problems, through to major ones that would have to be tackled immediately. You should also try to figure out the likelihood of each of these risks occurring by looking at case studies of your industry.
You should correlate this with the damage each of the risks would do to your business should they occur.
With these factors in mind, you can rank the risks you should address first – and go down the list from there.
Risk management plans
You start by implementing strategies to reduce the chances of your top threats occurring in the first place. You can do this through:
- Quality control processes
- Auditing
- Compliance with legislation
- Staff training
- Regular maintenance
- Changing procedures
Next you should formulate responses that you can implement quickly after an incident, such as:
- Emergency procedures
- Off-site data backup and storage
- Identifying alternate suppliers
- Risk transfer, like outsourcing
- Cross-training staff so that more than one person knows how to do a certain task
- Keeping old equipment after it is replaced so you have backup, and practicing doing things manually in case your computer networks or other equipment can’t be used
Secure proper insurance
If you have concerns about any of the risks you have identified and are unsure whether your current insurance would cover them, you should call us.
Here are a few insurance solutions to common risks:
- Coverage for the loss of income if customers affected by the crisis stop ordering your product or service
- Coverage for loss of your customers’ goods or materials
- Coverage to replace lost income if one of your suppliers is hit by a crisis and can’t deliver product to your firm