Developing a Risk Management Framework for your business

In the lifecycle of a thriving business, there will always be hurdles that need to be overcome. The key to safely navigating past these threats is proactively identifying where they may come from and how they can be dealt with: this is called Risk Management.

Risk management is something, which should be undertaken by all businesses no matter how large or small. Organisations of all types and sizes are faced with a wide variety of risks, which can impact upon their ability to achieve desired objectives.

The purpose of implementing a robust risk management framework is to effectively analyse and manage the risks to an organisation, which could have dramatic consequences in terms of economic performance, professional reputation, environmental impact and peoples’ health and safety.

It doesn’t matter whether you are a multinational investment bank or a local bakery, organisations of all types and sizes are faced with a wide variety of risks. Business owners should not feel that risk management is a practice confined to large players.

Effective risk management goes far beyond considering the consequences of financial risks, and risks to health and safety. It also considers a wider variety of areas such as a business’ product quality standards, environmental impact, human resources, public relations, social reputation, and regulatory compliance.

The internationally recognised standard for risk management is set out in ISO ‘AS/NZ ISO 31000:2009 Risk Management Principles and Guidelines’. Using the framework’s foundation, Sync or Swim can assist any business in developing an effective risk management framework that is tailored to that organisation’s unique objectives and operating environment.

The first step in developing an effective risk management framework is to identify and confirm your organisation’s objectives. This is a critical step in the risk management process as without knowing and understanding where you want to go, you won’t be able to accurately identify and assess the potential threats to your business’ success. If your organisation or business isn’t clear on its intended objectives, Sync or Swim can certainly assist by facilitating a workshop that is designed to identify where you want the business to go. Not only does this help in identifying risks, but it will also provide management and all staff members’ with important direction and goals to strive for.

Once an organisation has identified its objectives, it can then assess and evaluate any potential risk to achieving them. There are various risk assessment tools and techniques that can be utilised here. The most appropriate method will depend on the circumstances. By effectively analysing risks, decision makers within an organisation can make informed choices, prioritise actions and consider alternatives if need be.

Unless risks are effectively assessed and evaluated there is a real danger that if it materialises, an organisation may be taken by surprise, which can be severely detrimental to your business’ prosperity.

A proper assessment of a potential threat will help shed some light on the following:

  1. What can happen if it occurs and why.
  2. Would there be any flow-on consequences if it occurs.
  3. The probability that it may occur.
  4.  What potential options are available to prevent the risk occurring in the first place or mitigate the consequences identified above.

The actions that you decide upon in step 4 will invariably depend on the organisation’s unique risk appetite – this refers to the type and amount of risk that an organisation is prepared to pursue or take on before taking preventative action.

At Sync or Swim, we believe effective risk management for any organisation requires all levels of staff to be trained in identifying the risks relating to their tasks, analysing those risks and how to take appropriate action.  To do this effectively, the organisation must:

  • Educate the workforce about risk management and empower them to take appropriate action.
  • Consult with all levels of the workforce to lever their expertise in identifying the organisation’s risks.
  • Consult with all levels of the workforce to establish a system for analysing, evaluating and treating risk associated with the organisation’s activities, processes, functions or products.

Once an organisation has established an effective risk management system, it must be monitored and reviewed regularly to ensure that it is adapting to the changing dynamics that are an inevitable part of a thriving business.

If you would like more information on this important topic, or have any broader queries regarding risk management for your business, please do not hesitate to get in contact with one of our expert team members at Sync or Swim today.

Article by: Paul Bright, Business Improvement and Compliance Specialist.