Things you don't learn in school - What is risk management?

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When running a business there are many things to be taken into consideration. You don’t want to make bad choices especially if there are people working for you, but in access to grow, there are certain risks to take, especially if it could have a positive impact on the business itself. 

When there is an opportunity for your business to grow, it is important to look at this opportunity from all angles to see if this could be a positive improvement.  This is exactly where risk management comes in. 

What is risk management?

Risk management is the identification, evaluation, and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability or impact of unfortunate events or to maximize the realization of opportunities.

That is the long version, but in short, risk management is to identify certain obstacles and to monitor and control these obstacles so that it can have a positive impact on the business. 

To evaluate whether an opportunity is worth it, there are certain steps to follow:

Identify the risk.  If this opportunity consists of making changes to your business it is important to weigh up all your options. 

When a new opportunity arises, do not just say no to it, before you evaluate your options and weigh up the negative and positive aspects.  Just because you are scared of change doesn’t mean that it’s a bad thing.  A change is as good as a holiday so even though it is scary, this opportunity might do the business the world of good.  

Analyze the risk. Once the risks have been identified it is important to work through each and every possible scenario with your team to ensure that you make the right choice.  Bad or hasty choices could seriously damage your business and it is often difficult to recover from bad mistakes. 

Evaluate the risk.  What changes can be made to the proposal to minimize the risk?  Now you have to take the risks and break it apart once again.  If the risk could mean financial gain for your business then it is possibly a good risk to take, but you have to take in consideration what it will be for the whole business including the workers.  

Remember, without your workers you don’t have a business and any negative impact could mean a loss of money or even result in good workers giving up their jobs.  

Risk is all about uncertainty.  It is always a good idea to implement changes on a trial basis for a limited time to see the impact it will have on the business.  If you are able to do this then you can make a formal decision after the trial run.  If it doesn’t work out, then you have lost nothing.