How to manage risks in your business
Prioritize the risks of failing to meet your organization’s goals. Risk assessed for potential occurrence and impact. Risks are prioritize as follows:
- Determine how to configure high, medium, and low likelihood
- Define high, moderate, and low influence (in terms of financial importance, legal risk, and reputational damage)
- Risk overview and assessment
Risk assessment method
Risk assessment allows you to determine the importance of risk to your business and decide whether to accept, prevent, or minimize a particular risk. Risk assessments are worth identifying and ranking these risks.
This can be done by considering the aftermath and potential of each risk. You can weigh these risk assessments against your business plan. You can determine which risks affect your goals.
It can be evaluated in the light of legal requirements, costs and investor concerns. In some cases, it may be beneficial for your business to take no risk action, as the cost of mitigating potential risks is high.
Several tools can help you assess your risk. For example, risk heat maps can be used to plan the importance and likelihood of risk occurrence. Each risk is assessed in the squares in the table.
If it is rated high risk in red, this means excellent importance to the company. This map allows you to visualize each other’s risks, understand their extent, and plan what controls to implement to mitigate the risks.
Impact of risk factors
- Impact on goal achievement
- Financial risk
- Legal compliance and system compliance
- Billing and revenue
- Cost or operational concerns
- Contractual compliance
Potential risk factors
- Potential problem or lost opportunity
- Period to the surface as an undesired result
- Management concerns
- Operational structure, modification, and complexity
- Regulatory changes
- Financial incentives
- Past problems
- Asset liquidity
You have the following options for dealing with risks:
- Eliminate risk
- Delete the cause
- Reduce risk
- Share or transfer risk
- Accept the risk
For example, if the cost of eliminating risk is too high, you may choose to accept the risk. Insurance usually covers the cost of risk. Alternatively, you can mitigate the risk by introducing new safety measures or eliminating the risk by changing how the product is produced.
Risk assessment changes daily due to business growth and internal and external changes. This means that you should regularly review the process of managing business risks. Such a review can confirm the process’s improvement and indicate that the process is no longer need.