Safeguard Your Business with These Top Risk Management Tools

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The risks that businesses face in the modern world evolve at a pace that makes simple, compliance-based regulations moot almost as soon as they’re written. The risk-assessment approach, on the other hand, compels companies to weigh the risks facing their business and implement new procedures custom tailored to each threat.

Common business risks.

New risks surface constantly. Protecting sensitive customer data and financial information requires a fluid process that continually identifies new risks and adopts new prevention policies.

Risks that companies face can range from physical to human, and should be categorized according to the likelihood of occurrence, starting at “very little chance of occurrence” and ending with “very likely to occur.”

Tech journalist Marc Davis described the main categories in his Investopedia article, “Identifying and Managing Business Risks,” such as:

  • Physical risks – fires, explosions, and hazardous materials
  • Location risks – hurricanes, tornadoes, floods, and earthquakes
  • Human risks – alcoholism, drug abuse, embezzlement, and theft
  • Technology risks – communications, online storage and backups, and power surges
  • Strategic risks – research and development and loan services

Potential threats should also be insured against. For example, product liability insurance, fire insurance, and insurance against fraud and embezzlement are available to corporate entities.

Risk prevention procedures must also be in place and constantly updated to fit new circumstances. Some risk prevention is fairly static in nature, such as building evacuation procedures, while others, including cyber security, are in a constant state of flux.

Top risk management tools, and when to use them.

Risk management tools can reduce the probability of disaster for any organization. Harvard Business School professors Robert S. Kaplan and Anette Mikes presented several solutions in their Harvard Business Review article, “Managing Risks: A New Framework.” Additionally, Grey Campus’s Open Campus page adds even more proven methods to mitigate any type of risk.

Here are the suggested measures:

  • Independent experts – A risk review board can be created, composed of independent technical experts whose job it is to challenge projects in development and evaluate risk-mitigation decisions.
  • Brainstorming – A team or group of teams can be assigned to identify risk factors present in a project or strategy.
  • Facilitators – Companies can deploy a central risk-management group to collect information from all departments and present findings to managers; a complete picture of a company’s risk profile can benefit decision-makers.
  • Delphi technique – Sometimes, for reasons of fairness and impartiality, materials are sent to a team of experts anonymously. That team looks for potential risks and reports its findings to the appropriate decision-makers.
  • Embedded experts – Especially pertinent to the financial services industry, embedded experts work alongside line managers, continuously monitoring and influencing a company’s risk profile.
  • Tail-risk stress tests – Worst-case scenarios can be assessed by stress tests, which are designed to determine the immediate major effects that can be caused by events ranging from higher supplier prices to large swings in exchange or interest rates.
  • SWOT analysis – The SWOT process is used to assess strengths, weaknesses, opportunities, and threats. Following a SWOT analysis, a team can adjust its project to address any issues that are discovered.
  • Scenario planning – Decision-makers need long-range analysis to plan business activities and risk prevention requirements up to 10 years in advance. Analysts need to examine political, economic, technological, social, regulatory, and environmental forces that could affect the business in the future.
  • War-gaming – Short-term analysis requires that teams devise strategies or actions that competitors might put into play in the near future. War-gaming simulates the impact that those competitors’ disruptive technologies or services might have on the industry.
  • Risk register – A constantly updated document presenting a list of risks, potential responses, root causes of each risk, and continually updated risk categories can be included in the project documentation to keep decision-makers apprised of risk identification and prevention activities.
  • Risk data quality assessment – Project managers and decision-makers need to have access to all of the information regarding each risk for qualitative analysis. This information can include the data available on each potential risk, the extent of what is known about each one, the quality and reliability of the data, and the integrity of the data.
  • Quantitative risk analysis – Managers may opt to perform a quantitative risk analysis, which identifies risk responses that require urgent attention, the exposure of those risks on a project, the impact of each risk on the objective, costs and schedule reserves that could potentially be required if a risk occurs, and other risks requiring further attention.

Every type of risk, from hurricanes to employee theft to cyber attacks, must always be weighed and addressed by experienced professionals.

Prepare your organization. Earn your MBA.

With so many threats facing businesses from every direction, corporate leadership should strive to make risk management as multifaceted as the risks they are attempting to prevent.

Washington State University’s Carson College of Business can prepare you to address the complex task of risk management. WSU offers the top-ranked online MBA in the Pacific Northwest, with the option to choose a general MBA or a concentration in marketing, finance, hospitality business management, or international business. The result is a transformational experience designed to shape you into a modern business leader.

Learn how the online WSU MBA coursework can give you a competitive advantage in today’s fast-paced, globally connected corporate environment.

 

Recommended Reading: 

2 Critical Cybersecurity Lessons for Future Business Leaders

Security and Security Awareness for Distributed Teams

 

Sources: 

Risk Management Magazine

Investopedia

Harvard Business Review

Grey Campus

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