Risk Management

Running a business can be quite risky, as there is no way of telling the types of risks that you are going to face. Some of these risks can paralyse your business, while some of the risks can seriously damage your business, while other risks can completely damage your business and even prevent it from getting it back to its feet. The impact of a risk can be so severe that it can result in monetary losses, loss of production, loss of customers, and loss of goodwill. Timely action can help prevent all these losses and save the business from total damage and this can be done through risk Management strategy.
Before we jump to Risk Management and risk management methods, let us examine and study what are the different types of risks.

Physical Risks
Physical risks include risks to the building from fires and explosions. It is extremely essential to ensure that no hazardous or dangerous materials are stored in the office premises. People who work and deal with these materials should be properly equipped and trained to handle these materials safely. All the employees should be trained regarding evacuation measures in the case of emergencies.

Locational Risks
These risks include risks from floods, hurricanes, tornadoes, earthquakes, and other natural disasters.

Technological Risks
One of the most common and frequently occurring risks that affects production and businesses are power outages which often cause losses due to reduced production. Computers and other important office appliances can be kept running through generators, high-power back-up batteries or inverters. Power surges are likely to occur in storms, and so you should ensure that your computer network is protected by surge-protectors. Offline and online data back-up system should be used to protect all your vital documents.

Human Risks
Some of the major risks that occur are human-related and are the most common of the risks. Some of these risks include alcoholism, drug abuse, embezzlement, theft, fraud, and sickness.

Now that you know about various types of risks, the next step would be to prioritise and manage those risks.
After the risks have been identified, they have to be prioritised according to their assessment and the probability of their occurrence.

Prioritisation of Risks
Risks can be categorised into the following groups:

1. Very likely to occur – There are very strong chances of such types of accidents to take place.

2. Less likely to occur – There is a very less chance of such type of accidents to take place.

3. Least likely to occur – There is a very remote chance of such accidents to take place.

There are Actuarial Tables available which can tell you about the various types of risks, based on statistical analysis, and the probability of them occurring.

Management of Risks
One of the first steps for managing a risk is insurance as many of the risks are insurable. The first and foremost risk that should be covered is fire and it should take a top priority. You should also insure your business and the premises against riots and other natural disasters.

It is advisable to get your business covered against thefts, frauds, and embezzlements.

If your business is into computerisation, insurance coverages is a must.

Prevention of Risks
The best way of risk management is prevention. Risk prevention can be undertaken through employee training, regular safety checks, and proper equipment maintenance. It is essential to have a risk management committee which can specific tasks to specific members which can be overseen by a risk manager.

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