Corporate risk management: your options

Every business faces risks – both internal and external – but there are a number of options

you can explore when it comes to deciding how to deal with them.

In corporate risk management, the first step is to identify and outline the risks your business

faces.

Here are some common categories of riskto consider:

Hazard risks such as natural catastrophes, property damage and lawsuits.

Financial risks such as cash flow issues, commercial viability, debtor management

etc.

Operational risks such as reputational damage, customer satisfaction and product or

service quality.

Strategic risks such as social trends or new competitors starting up.

Once you’ve identified the risks you face, the next step is to think about the likelihood of

each risk eventuating and the consequences if it does – these help you decide which risks

should be a priority.

When you’ve identified your priority risks, it’s time to work out what you’re going to do

about them.

Sometimes you can get rid of a risk entirely – for example by doing something differently,

renegotiating a contract, replacing equipment or ceasing an activity.

In other circumstances, you can plan to reduce the likelihood of the risk – for example

through training– then implement a plan to mitigate the effects if it does happen.

Some risks which can’t be avoided, and which are substantial, can be “transferred” to

insurers.

Many types of insurance are available guarding against everything from catastrophes and

management liability to cyber exposures such as computer hacking.

Insurance can be purchased direct from a single insurer or through an independent broker

who investigates the market to find the most appropriate cover at a reasonable price – and

who will then go in to bat for you in the event of a claim.

By clarifying the level of risk that is acceptable to you, and by fostering a culture of

responsibility and integrity in staff, management can help keep risk from becoming a drag on

the business.

Some risk can give rise to opportunity, such as a bank’s credit risk when lending money, or a

miner’s when sinking a new shaft. Risks associated with research and development activities

can also be worth taking if all goes well.

Risk management is an ongoing situation which should be regularly reviewed, with processes

updated, taking into account changing customer tastes, the financial environment, legal

changes, competitors’ initiatives etc.

In larger organisations, internal auditors contribute to the review and assessment processes

and ultimate responsibility rests with the C suite (the top senior executives) and, in turn, the

board. In smaller businesses risk management updates may be a less formal process

conducted by the owner or a senior manager.

Strong corporate risk management and appropriate insurance are complemented by business

continuity planning and crisis management planning – as accidents can and do occur in even

the most risk aware businesses, and natural catastrophes are always a possibility.

The above advice is general advice and has not taken into account your personal

circumstances.

Here the author, James, writes this content about corporate risk management. If you have any

query about services, visit our website http://www.ebminsurance.com.au/ or feel free to call

us on 1300 467 873