I walked into the interview room still trying to understand what risk management within the corporate setting was all about. Despite knowing what the words risk and management meant separately, I did not seem to grasp the actual meaning of risk management within a corporate setting. I was interviewing for a position in a risk management consultancy firm. I confidently walked into the interview room determined to get the job.
“What does risk management mean?” asked the interviewer after pleasantries and academic background questions among others. Well, the research I had done on risk management seemed to instantly vanish when I needed it most. I do not recall what my answer was exactly but it was not entirely correct. Thankfully, I got the job and got to learn and apply risk management principles.
I quickly realized that most of the clients I worked with did not know what risk management was either. Risk Management is a field that I am passionate about. Partly because I have to work with people to help them manage the risks they face in running their daily business processes. But mainly because the goal of risk management is to ensure achievement of the goals and objectives set for a business or an organization. We apply risk management in our everyday activities and in life in general. When you ensure that you have locked the door at night, you have managed the risk of a thief breaking into your house while you sleep.
When it comes to running your business, you have in some ways been managing risks without thinking about it in the concept of risk management. Perhaps you are meeting a potential client for the first time. Your goal is to expand your client base and to do that one of the things you need to do is create a good impression. If you are running late, you might choose to skip breakfast to get to the meeting on time. The risk here is being late for the meeting. You mitigate this risk by skipping breakfast. You have therefore managed risk. While we sub consciously apply risk management as we run our businesses, it is important to have a risk management plan in place. This is because many risks that could potentially happen go unnoticed. We are not aware of them or we think that they will not happen to us but once they occur, they leave a lasting negative impact. At any one point you should know what the top risks your business faces are.
Risk management is a deliberate ongoing process that involves identifying the risks that could potentially occur and affect your business. After risk identification, one has to analyze the risks in order to classify them and focus on managing the key risks. The risk could be as simple as late delivery of an order yet it could have a big impact. If you run a bakery, late delivery of a wedding cake could be a risk that might have a negative impact on positive word of mouth advertizing yet word of mouth advertizing is critical to a small business. If you run a catering business, what measures have you put in place to prevent a food poisoning incident from happening?
So, do you have a risk register for your business? You should have one in order to either prevent risks from occurring or to be well prepared in case a risk occurs by minimizing its impact.