Risk management is intricately interwoven in the functioning of any business; there is no way that risks can be averted. The best thing to do this is to be equipped well to face such situations; and to be able to do that a proper effective risk management system has to be set up, advises veteran in handling risk management Michael Saltzstein.
Risk management needs a lot of expertise, not everyone can do it; it is therefore that business owners hire individuals dedicated to the purpose. Professionals dealing in traditional risk management or enterprise risk management should be hired by business owners to ensure proper adherence to risk control measures. The only ways to handle risks are to either eliminate them or devise means by which their effect can be minimized.
An adept risk management system needs to be developed as it helps a business protect both its reputation and resources. Every business has its own customized risk management plan, points out Michael Saltzstein that depends on the company culture largely. The protocols of the company also play a key role in this regard along with certain principles that ought to govern a good risk management plan.
The principles of risk management
The basic principles on which a risk management plan should be based include the following:
- Early identification of risk – the most crucial principle to be followed in managing risks; it is only after identification that one can move ahead with dealing with it. Hence, the earlier the risk is identified, the quicker is the solution to it found. The process of risk assessment is the tool used for the purpose.
- Consider the company rules and protocols – it is pertinent that the risk management scheme has to be in accordance with the company’s ideologies and objectives. The fact that a risk will certainly affect the financial, reputational, or functional aspects of the business. An expert in risk management such as Michael Saltzstein will ensure that they are seamlessly intertwined in a way that they complement each other.
- Consider the context – every company varies in terms of its tolerance to risks. The context, both external and internal too will be varied across companies. Hence, keeping in mind the context the risk management plan should be curated by business experts.
- Make sure there is clarity in roles and responsibilities – a risk management process can only be successful when everyone working within the business put in their contribution duly. The expected responsibilities of everyone within the organization should be clearly informed so that they know how their role can make or break the business. Conduction of discussions is a helpful tool here as the viewpoints of every employee can be heard as well as their doubts clarified, informs Michael Saltzstein.
- Include the stakeholders – when it comes to the effective management of risks, every stakeholder must be involved. They should be aware of what the probable risks are and how the management team intends to curb those risks. Thus, every person involved in the particular project should be aware of what is going on and thereby transparency maintained.
- Create risk review cycles – the identification of risk needs to be followed up by evaluation and implementation of preventive measures where ever applicable.
Having followed the above principles one would also need to ensure that they endeavor towards continuous improvement and gradually evolve as a better business.