Risk Assessment and Management – Why is it essential for your business?

Managing risk is integral to almost all aspects of daily life. From checking the weather forecast before your walk to work, to online shopping, the same is true for your business. When a company has a mindset that is prepared and risk-aware it is free to reap the benefits. This also inspires the confidence of its employees and customers. 

Risk is both internal and external. Internal risks can include non-compliance, data breaches, cyber theft, and even personal injury; so a robust system to manage and assess risk is essential for your business. External sources of risk however can have existential implications. Geopolitical crises, financial instability and climate change; to something as minor as exchange rate fluctuations are all capable of inflicting severe damage.

Risk management is a process, often occurring once annually in most companies, in which the opportunities or threats to an organisation’s capital and earnings can be identified and controlled. A resilient framework ought to:

  • Increase the resilience of your business operations and even identify gaps in the market.
  • Protect all individuals involved and their assets from potential harm.
  • Establish consumer and market confidence in your business.
  • Forecast future threats using reliable statistical data and trends.
  • Helps to create a clearer picture of your company’s finances and resources.
  • Identify new areas of growth in your business.

Covid-19 was an unprecedented event that upended business operations and saw governments turned to for guidance and support. Even developed nations sought direction from each other in finding a solution. No company or government could have forecasted this, let alone try to risk assess such a crisis. The result inescapably set many businesses back at least a decade. Whilst unavoidable, Covid-19 highlights why risk management and assessment is vital and we are seeing companies adopt blueprints to prepare for similar scenarios should they occur again.

In the same year, the looming uncertainty Brexit posed to businesses across the UK and EU was broadly anticipated. Whilst negotiations were ongoing, businesses that remained attentive to economic and political developments, and prepared for a no-deal Brexit through rigorous risk assessments emerged comparatively unscathed. Their operations were minimally disrupted and their supply chains remained broadly sustained. 

Increasingly, businesses are recognising that we are in an era of high volatility. Technological advances, global political change, economic instability and climate change all demand a thorough business risk assessment plan. Demand for these plans are unsurprisingly at an all-time high. One form of planning includes the adoption of good ESG (Environmental, Social and Governance) practices into thousands of businesses’ operations. It has been recorded that companies that fail to mitigate risk through appropriate ESG principles underperform the market with a 3.5% performance drag annually. 

Whilst ESG, for example, can forecast an impact of climate change and internal business risk, it can be easy for some businesses to drop the ball. Some examples of this are:

  • The illusion of control: Risk frameworks can create false beliefs that every risk is quantified and mitigated. The phrase ‘expect the unexpected’ is quite appropriate in that a business can never mitigate against everything. Those which do neglect other important aspects of the business and fail to realise that risk can sometimes present an opportunity.
  • Over-caution: Risk is integral to life, so trying to mitigate every risk is an ineffective and expensive use of resources. Treading too carefully may damage company profits in the long run and cause confusion where before there was none.
  • Interpreting trends and data ineffectively: Reliance on simple indicators may fail to reflect the much more complex realities of a situation. Companies cannot adopt a one size fits all approach based on such foundations and therefore may require some direction.

The College Green Group Academy wholeheartedly believes that risk management plans are essential to minimising the impact of such scenarios. We understand the need to develop and execute such plans so you can have inimitable and competitive advantages.

College Green Group Academy’s Assessing and Managing Risk course is launching in September and will guide you through these frameworks, what trends to observe, and will show you why managing risk is an essential step forward for your company. 

Contact our team today to find out more and book your place on this exciting, informative course.

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