There is a risk to every business decision you make. So instead of relying on gut instinct for an answer, you can feel far more confident by having risk management processes to help guide you.
Take Jimmy’s transport business as an example. He drives trucks to move commercial products around Australia. Some of the hazards he may face on a daily basis include:
- contact with chemicals and fumes when refueling
- uncomfortable seating and fatigue, especially during long journeys
- no heating or air-conditioning to change the temperature inside the truck.
Some steps that Jimmy can take to reduce these risks include:
- wearing appropriate clothing to reduce his exposure to chemicals
- taking regular breaks during his trips to stretch and walk around
- ensuring that he only works the legal hours for his industry to deal with fatigue
- installing fans or air-conditioning in his truck
- having adequate clothing and water for each trip.
What is risk management?
Risk management helps you make better business decisions. When you practice risk management, you try to reduce things that may have a negative impact on your business. You also look for opportunities that can have a positive impact.
It allows you to identify the different types of risk and when events in your business will allow you to dictate the opportunities from the uncertainties.
How can I manage risk in my business?
Begin by finding out about risk management practices and how you can use them in your business. You should also talk to others involved in your business (including your employees and your customers) to work out the best way to manage risk in your business.
Before you can reduce risk in your business, work out what your risks are and which ones are most urgent.
Follow these steps to identify, analyse and evaluate your business risks:
- Identify – note the risks your business may face.
- Analyse – work out the level of risk and which ones are most urgent.
- Evaluate – compare the risk against set risk criteria to decide what action to take.
Why manage risk?
By managing risk properly, you can reduce the impact of unexpected events on your business.
Managing risk can help you to:
- improve your relationships with customers, suppliers, employees and the community, by understanding and managing their expectations
- improve staff confidence in a safe work environment, by having workers’ compensation insurance and workplace health and safety (WHS) policies
- keep your business open during natural or economic disasters, by having an emergency management plan
- reduce your compliance and insurance costs, by having a lower risk of damages.
You won't always have enough information, knowledge or resources to manage every risk. A good risk management plan will allow you to change your approach if it isn't working or if you come across an unexpected risk.
What to do…
- Find out what to include in your risk management plan
- Learn how to assess business risks
- Read our tips for good risk management.