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If you have been thinking about the risks of running a business, and believe that your industry is relatively safe, you should think again. With increased government and industry regulations in every aspect of business, you will need to focus more on your risk assessment activities more than you would think. In case you are not convinced yet, below you will find a few reasons why monitoring your risks makes business and financial sense as well.
Compliance
Your business needs to comply with the latest regulations, no matter which industry you are in. When you are a personal trainer, you will need to consider the needs of your clients, and document their fitness assessments, according to your industry’s standards. If you work in the financial sector, you will have to be aware of the anti money laundering regulations, so you can prevent fraud and financial loss. You have to keep an eye on the new law and have a professional legal advisor to assess your risks regularly.
Liability
In case your business serves the public, you will have to prevent liability claims and court cases that can damage your business. As a minimum, you will need to take out a public liability insurance to cover the legal costs and advice. You might not be at fault when a customer gets injured on your premises, but you can still be made legally responsible and prosecuted. It is important that you identify the most important public liability risks and address them, creating policies that can potentially prevent accidents and damages.
Waste
Addressing risks of waste is equally important. While the Lean production and manufacturing principles were designed for industrial companies, they can be applied to any business; from consulting to financial services. You will have to minimize the waste by focusing on quality assurance and standards, and continuously improving your value chain. As a result, your company will have fewer complaints and returns, and will realize higher profits.
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Downtime Prevention
You will also have to make sure that you are minimizing the downtime in your business, or you will end up losing money. There are different risks of downtime, such as machinery breakdowns, illnesses, poor employee relations, and supplier issues. You have to prevent downtime by having emergency and contingency plans in place. A professional risk assessor can identify the different risks and help you create solutions that can prevent them.
Financial Loss
Your business finances also pose a huge risk on your continuity. If you lose money on contracts, or get into a legal trouble, you might even be forced to close down your business. Financial loss is often caused by bad planning. You need to maintain your company’s liquidity by having emergency funds and access to credit. You will also have to review your contracts with customers and reduce the risk of non-payment. Make the payment terms clear and employ a debt collection agency if necessary.
Reputation Management
You have to also assess the reputational risks of running your business. A competing firm might engage in a negative campaign about your company or brand, or a distressed employee might start a social media petition that can damage your reputation. You have to check your employment policies and review the confidentiality agreements. Further, you have to be as transparent as possible. If you are found guilty at environmental pollution, it is better to let the public know what you are planning to do about it than trying to hide the secret and being found out.
Crisis Management
Every company goes through rough times. Whether you are unable to complete a large order, or have problems with your staff, you need to have the solutions ready for when you need it. This is why taking risk assessment seriously is crucial. You will have to identify the potential risks and the solutions, so you don’t have to think on your feet. You should train your project managers on how to handle sensitive situations and address crisis.
Legal Issues
No matter if you are a teacher or a business coach, you will be liable for the damage you cause for your customers. Whether you are giving the wrong financial advice and your client loses money, or you fail to prepare your students for the exam, you might face legal challenges. If you supply your customers with faulty or dangerous products that cause accidents, you will have to pay a compensation, if found guilty. By identifying the legal risks early, you can develop guidelines and policies, spot checks, and quality standards that will help you stay out of legal trouble.
Employee Relations
If you don’t develop a human resources policy that covers every aspect of employment, you might end up in a crisis. It is important that you provide all the training and information your workers need to do their job right, and let them know about the consequences of not complying with the policies. If your employee contracts are not clear, you might face an unfair dismissal or discrimination case that will damage your reputation and your future chances of attracting talent for your business.
Business Partner Relationships
It is equally important to keep your business partners happy. While your employees deliver the value for your customers, your business partners can also be valuable. If, however, they don’t share your business standards and principles, and have unfair employment practices or accounting tactics, you can be found guilty by association. You should always vet your potential suppliers, contractors, and joint venture partners and identify the risks of being associated with them.
Today’s managers should pay attention to the changing landscape of industries and the new regulations that surround every business. They have to regularly complete a thorough risk assessment, so they can prevent legal and reputational trouble. From financial planning to employee and business relations, everything needs to be covered by the risk assessment schedule. This way, businesses can carry on producing value for their customer and improving their offers.
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