What Benefits Are Gained by Implementing a Risk-Management Program?
Implementing a risk-management program may seem like an extravagant policy for a small business to consider, yet such a plan has a place from business planning through insurance to operations planning. Risk-management programs provide both the strategic basis and the operational framework for handling crisis within your company, as well as providing a parent policy for crisis management.
Defining Risk Management
Risk management to a financial planner has different meaning than to a manufacturing operations manager, yet in essence it refers to managing factors that interfere with achievement of business targets. Your small-business risk management program may incorporate several disciplines, such as financial risk, liability management or health and safety initiatives, all of which may intertwine. The needs of your business define the scope of your program. There is no one-size-fits-all risk-management plan.
Having a risk-management program may be welcome news to your banker and insurance agent. Both are risk managers by profession, so you may see a banker willing to increase credit lines, while an insurance broker can affordably customize your coverage based on a well-designed risk program. The presence of a risk-management program may aid you in proving due diligence in legal action, potentially limiting and protecting your liability in case of a lawsuit.
When your risk-management program identifies and prioritizes key risks that are likely to occur, you improve your company's chances to plan and respond. In turn, this saves you staff hours away from the core efforts of your business. For example, health and safety components of your program may address ergonomics and equipment safety, reducing lost-time injury. Production contingency planning gives your staff alternatives for re-routing production, when an important machine goes down, for instance.
The presence of an active risk-management program says something about your company's brand. Workers have knowledge of expectations and leadership from the start of their employment, while your business develops a reputation as thorough and professional. You build and support strategic planning through development of your program, and you establish a standard to which you can evaluate performance and adapt to changing needs. When you anticipate risk, your preparation begins, and the shock of the unexpected is dissipated.