Basics of Risk Management

The Importance of Risk Management in Business Operations

Claudio Gutierrez

Claudio Gutierrez

President & Founder — Valens Project Consulting

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It seems that the only aspect of business we can truly count on these days is to expect the unexpected. From supply chain issues, to workforce retention, and even global politics, the factors that will affect your business seem almost countless, and to not take the time now to plan for some disruption in the future is simply irresponsible. Risk management will get you back on track and help ensure your project’s success. Assuming your projects won’t run into problems is naïve wishful thinking, so you better plan accordingly.

 

But where do you start?

 

The question seems simple enough, but it varies according to your industry. Manufacturers have their Failure Modes and Effects Analysis (FMEA), industrial distributors rely on Control Plans as the heart of their quality programs, and financial institutions rely on a number of strategies and vehicles to help them forecast and mitigate risks. Whether you think so or not, risk management is something that you absolutely need in your business and it is not beyond the means of even the smallest companies.

 

How? Aren’t risk management resources affordable only to huge companies that rake in billions?

 

Not at all! Read on!

 

Keep it Simple

 

There are many methodologies out there to address the issue of risk management and some of these are exceedingly complex, but for simplicity’s sake, consider just sticking to the basics of risk management and you will already have a sturdy foundation on which to build from. A simple 3 step approach will have you better prepared to deal with surprises don’t the road.

 

Identify Potential Risks

Risks to your operations may appear from any number of sources, from extreme price fluctuations, to having servers go down, to even changes in demand, so it’s important to kick off any risk management initiative with as many experienced team members from each specialty. Ideally, this brainstorming exercise should include input from all departments. If there are documented lessons learned from past projects, it would be a good idea to use these to try to identify potential future risks.

 

Document Reactions to Each Scenario

Each scenario thought up of during risk identification exercises should then be accompanied by corresponding solutions. Since risks probably won’t materialize exactly in the manner planned for, care should be taken to consider slight variations of each risk and solutions, so that there are less surprises down the road.

 

Implement Plan

Risk identification and reaction scenarios must all be formulated into a formal company-wide policy, be easily available for reference, and be communicated to as many team members as possible. No matter how perfectly crafted a risk management strategy is, it will be useless if your team members are not aware that it exists. At the very least, if should be brought up from time to time during bullpen talks by upper management or safety minutes during meeting kickoffs.

 

Regular Evaluation of the Plan

It is smart housekeeping to review your processes and procedures on a regular basis, and the same applies to your risk management strategy. As your organization grows and prospers, the problems encountered will become more critical and it’s essential to have a working risk management strategy.

 

At Valens Project Consulting, we do our best to support our customers with their existing risk management approach and will gladly help you develop a risk management strategy to suit your needs. So feel free to reach out and for a free evaluation on how we can help you navigate the turbulent waters of the current business world!

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