How to manage your company’s risks?

In practice, risk management is a process that aims to prepare the organization for the unexpected, identifying threats before they happen to manage your company’s risks. The idea is to prevent them from materializing or to solve the problem more quickly. For this, it is necessary to identify, assess and control risks.

Thus, this strategy is essential to avoid losses in the most diverse areas of the company. This is because threats can arise from a variety of factors, such as strategic management errors, legal liabilities, natural disasters, etc.

In addition, risk management allows a company—no matter its size—to better deal with unforeseen risk. After all, the business will develop greater problem-solving skills and find opportunities to improve processes to achieve its goals.

Types of risk

Now that you know what risk management is, it is interesting to understand what types of risk a company can suffer. Look:

• compliance risk: refers to loss of documentation, insertion of new rules;
• strategic risk: related to topics such as political scenarios, a new competitors in the market;
• financial risk: involves issues such as indebtedness, customer default, interest rate increase;
• environmental risk: relates to natural disasters;
• cyber risks: deals with issues such as hacker attacks, and cyber fraud;
• operational risks: related to problems that compromise or can generate rework by employees, such as equipment breakdown;
• risks in the work environment: referring to issues such as exposure to toxic substances, extreme temperatures, etc.

How important is this strategy to manage your company’s risks?

You already understand how to manage your company’s risks. Therefore, it is interesting to discover the importance of this strategy. To facilitate understanding, imagine a city that suffers from recurring floods.

So, the buildings started to be constructed in order to reduce the damages in case of a new flood. At the same time, the city hall structures project to prevent occurrences. This measure is a strategy that makes up risk management.

The same principle can be applied in the business world. By identifying threats and taking steps to avoid them, your company is able to face adverse situations in the best possible way.

In the case of financial risks, for example, proper management can avoid fines, debts, waste, and the wrong contracting of credit lines. Therefore, risk management prevents losses that affect the financial health of the business.

How to manage your company’s risks?

After understanding what risk management is and what it is for, as well as the types of risks, it is time to understand how to apply this strategy in your company. Next, check out the necessary steps!

Identify the risks

First, it is important to identify the risks in order to have data that allow us to draw up the management plan. As risks can vary from company to company, this identification must be made from a deep knowledge of the corporation’s processes.

To this end, you can bring together collaborators from all areas to point out the problems in their departments. In this way, it is possible to list threats and identify points that might not be noticed by managers.

Do qualitative analysis

After identifying the risks, it is important to make a qualitative analysis of what was perceived. In it, you organize the threats according to their relevance and impacts on the functioning of the business, in addition to the probability of them materializing.

Perform quantitative analysis

The next step is to perform a quantitative analysis. In this step, you must numerically classify the effects of each risk identified so far. In this way, you will be able to see the situations that may occur, if the threat is consummated.

Establish risk responses

Once the qualitative and quantitative analyzes have been carried out, it is time to plan and implement risk responses. That is, to establish the possible solutions for each identified threat. In this case, the hierarchy must also be considered.

This means that the determination of strategies for each problem must start with the most urgent risks. In this step, the actions must also be put into practice as planned, considering the company’s budget.

Monitor risks and actions

With the plan in place, it is time to monitor the risks and the execution of activities to minimize the threats. This step is important for you to monitor whether the established solutions are efficient. If not, you can make adjustments to the strategies.

What tools can help with risk management?

You have seen that risk management is essential for the smooth running of the company. To put it into practice, it is possible to use tools to make the process more agile.

Check out the main ones!

What If

The term “What If” means “what if”. The method consists of assuming all the potential risks of the company and their causes. It is made from meetings with employees in which hypotheses arise based on the question “what if?”.

In this way, it is possible to imagine different problems and solutions for each one of them, based on different scenarios.

Process Failure Mode and Effective Analysis (PFMEA)

Translated as Failure Mode and Effect Analysis, this tool helps to identify and judge the chances of errors, based on cause and effect situations.

In addition, it points out the consequences and suggests actions that can minimize the realization of risks. The PFMEA is also able to tell the probability of occurrence.

Do you understand how risk management is an important strategy for the company? By adopting it, it is possible to foresee threats and put actions into practice that can minimize risks and improve business results.