What is Business Risk Management?

What is Business Risk Management?

Risk, in simple words, can be defined as the likeliness of an event and its consequences. Business risk management is the process of identifying, tracking, and dealing with potential risks to prevent or curb their negative impact from affecting the organisation in both short-term and long-term. Through effective risk management services Brisbane, your business can enjoy sustainable growth and success because the process will help in identifying risks that threaten the survival of the organisation. It is vital for the welfare and success of any organisation because apart from identifying potential risks, it provides helpful guidelines for handling them.

It must be noted that every business faces certain risks that may threaten its survival in the industry/market such as security breaches, cyber-attacks, data theft or data loss, system malfunctions, and unpredictable natural disasters. Through risk management, certain processes, methods, and tools are developed that help in managing these risks. The focus of risk management is on timely identification of issues and events that can have negative impact on the business and evaluating those risks that require immediate attention along with implementing strategies to handle those risks. Businesses that perform risk management are better prepared for threats and can prevent uncalled for financial losses by employing the cost-effective process of risk management.

What type of Risks Businesses Face Today?

There are various categories of risks that businesses face today. These include:

Strategic Risks:

These risks are associated with the industry the business operates in. Usually, strategic risks arise from one of the following scenarios:

• New competitor entering the market
• Acquisition or merger
• Changing trends in the industry
• Changing demands or preferences of consumers
• Research & development

Compliance Risks:

Businesses need to comply with certain industry standards, code of conduct, and laws and regulations. Moreover, they need to operate as per the expectations of the customers and investors. Appropriate corporate governance is one of the ways to prevent compliance risks from affecting the business. There can be many risks associated with compliance such as the introduction of new health and safety laws that the company need to comply with by changing its policies.

Financial Risks:

As the name suggests, financial risks are directly linked with the finances of the business such as the transactions carried out or the fiscal structures and systems implemented. Identification of financial risk means you need to regularly examine your business’s financial operations including cash flow. Such as, you should not depend too much on a single customer because if you don’t receive payments on time it would be detrimental for your business. Increment in interest charges that can affect a business loan operation or failure of equipment are important examples of financial risks to the business.

Operational Risks:

These risks are related to the administrative and operational processes of your business such as recruitment, IT systems, demand and supply chain, accounting, board composition, and regulations.

Environmental Risks:

Environmental risks include natural disasters and calamities that can affect the operations of the business like hurricane, earthquake, floods, storms, heavy rains, and tsunami, etc.

Remember that these aren’t the only categories of risks as there may be employee related risks such as retaining employees, or political risks, health and safety risks, economic instability risks like fluctuating currency rate, and technology related risks such as data theft or scams.

Three Step Risk Management Process:

Risk management comprises of three steps namely- risk assessment & analysis, risk evaluation, and risk treatment.

Risk Assessment & Analysis:

In this step, the organisation’s vulnerability and exposure to uncertain issues and events is assessed primarily against the impact of the event/issue on the business operations. Analysis of probable damages that could be incurred by these events on the revenue and image of the organisation is part of the process. Risk management Brisbane carries out this process by obtaining exclusive, in-depth information about the organisation, the market of its operation, and salient political, social, legal, and cultural aspects in order to provide a fair and accurate analysis of its strategic objectives.

Risk Evaluation:

During risk evaluation, the risks identified during the analysis process are estimated against the organisation’s pre-established risk criteria. The criteria may include associated costs and benefits, legalities, socio-economic factors, and system-related issues.

Risk Treatment:

After evaluation come the process of risk treatment and response in which risk management services Brisbane implements the processes and policies developed especially to prevent or minimise the identified risks.

Benefits of Risk Management Brisbane:

Risk management isn’t a one-time activity but an ongoing process. Once the identified risks are mitigated, the next evaluation process will start to timely track possible risks/threats. If an organisation revisits its risk management policies every year, it is possible to ensure most relevant and updated policies, which is directly proportional to successful risk mitigation and prevention. Through effective risk management Brisbane, you can successfully prevent serious financial losses form affecting your business and your organisation will become more established. You will be able to deliver your business plans and achieve goals on time and within the allocated budget.

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