How Well is Your Company Managing Risks?

A U.S. investigation commission attributed the BP Oil disaster to management failures that crippled “the ability of individuals involved to identify the risks they faced and to properly evaluate, communicate, and address them.”

Does your company fail to identify and address risks?

Types of common risks your company may face:

• Equipment malfunction, breakdown, or theft of key tools.
• Environmental risks, including natural disasters.
• Employee work-related injury or illness.
• Financial instability.
• Compliance or inspection risks.
• Operational risks – destruction of accounting information, supply chain, IT, and data risks.

How to evaluate a risk:

• Identify potential risks and risks that have occurred previously.
• Rank the identified risks. Rank by the probability of this risk occurring and the overall consequence or impact this risk may have on the company. Prioritizing risks allows you to direct time and money toward the most important risks.
• How will each risk affect your business objectives and overall goals for the company?
• Evaluate in light of legal risks and total cost of incident – In some cases, the cost of mitigating a potential risk may be so high that doing nothing makes more business sense. Be sure to include both direct and indirect costs.
• Consider creating a Risk Map for better visualization.

Tips to improve risk management before incident:

• Continually assess the likelihood of an incident occurring.
• Have set documentation of actionable items to respond when an incident occurs.
• Be sure to properly train all employees and continually practice responding to incidents.
• Provide clear direction on the job each employee must execute during an incident and be sure each employee understands their role.
• Have effective consequences in place when an incident is not handled correctly.
• Ensure all resources needed to execute the plan are stocked and ready.
• Allocate a sufficient budget for risk events and determine an accurate cost of an incident occurring.
• Monitor effectiveness of your risk management strategy and update as necessary.
• Be sure to have the right insurance aligned to your specific company needs.

Tips to manage risk after incident:

• Accept it.
• Transfer it.
• Reduce it.
• Eliminate it.

For example, you may decide to accept a risk because the cost of eliminating it completely is too high. You might decide to transfer the risk, which is typically done with insurance. Or you may be able to reduce the risk by introducing new safety measures or eliminate it completely by changing the way you produce your product.

Your company cannot prepare for all possible risks but having an effective and efficient risk management process in place will save your company money, time, resources, and the health and safety of your employees. For risk management assistance, call Jim DePew below.

Jim DePew
Vice President & Consultant
Mobile: (330) 631-9022
Office: (330) 915-2355 Ext: 103
Email: jdepew@bdewees.com