What Risk Management Strategies Should You Implement in 2023?

Let’s daydream a little here. Instead of being a CEO, you’re a treasure hunter. In many ways, that’s the same thing. 

You’ve just discovered an ancient tomb, filled to the rim with gold, jewels, you name it. You’re eager to claim your treasure, but first, you need to navigate through a series of traps and obstacles. You’re not going in blind. You came prepared and did some risk management.

Truth be told: this sounds a lot more exciting than what business risk management is, but it is just as important. 

In this article, we’ll walk you through everything you need to know about risk management. Does your business even need it? And what strategy fits you best? Let’s find out, treasure hunter.

What is risk management all about?

To ensure a successful treasure hunt or a successful business venture, you will have to identify the possible risks and hazards you might run into along the way. You will assess how likely they are to happen, what their impact is, and how you can minimize or mitigate them. Then, you put the right measures in place. All of that is risk management. It’s not just identifying the risks, it’s proactively trying to prevent them from damaging your business.

You could be running an oil rig, and the risks would be quite obvious. You will need to conduct regular safety inspections, replace and repair equipment and make sure your team is trained properly. Then there are external risks that you should be aware of and either insure yourself for or try to minimize their impact the best you can. 

Does my business need a risk management strategy?

Chances are you would greatly benefit from a risk management strategy, even if you’re nothing like an oil rig company. 

The problem with many businesses is that when creating their business, they focus a lot on the opportunities out there. After all, that’s what makes a business viable and brings in the money. But nobody wants to see the glass as half full and focus on the negative: all the bad things that could happen to your business–whether you’re in control of them or not.

Because there’s a lot that can happen! Here are some business types or professions you might relate to and why they need risk management.

  • Investors: any good investor knows that it’s not just about trying your luck. You’re going to want to assess the risks before you invest your own or someone else’s money. You could use methods like a portfolio backtest, to see how it would’ve played out in the past. Because let’s face it: you can’t simply predict the future.
  • Bars, restaurants, or other hospitality businesses: in a kitchen or behind a bar, staff needs to be aware of risks related to food safety. Products can get contaminated when handled incorrectly, and guests could get ill. A basic risk management strategy includes regularly training your employees on good handling and sanitation procedures. Of course, in most countries regular health inspections will also happen, so make sure you know what to look out for.
  • An e-commerce business: it might seem safe behind your laptop, but eCommerce businesses are at high risk of online security and data breaches. You’ll want to implement a risk management strategy that involves robust security software, correct handling of data, and updated systems so they stay protected against potential threats. You will also want to train your employees on things like the GDPR, if relevant to you. Here’s more on how to protect your company against privacy invasions. 
  • A construction company: a hard yellow hat isn’t going to cut it. Construction companies need to make sure their employees stay safe, that they don’t damage any property and that they don’t harm the environment they’re building in. Regular safety inspections and training employees on proper safety procedures are only the start.
  • A financial institution: you’d think we could now easily detect all fraud and that every trick of the book has been played, but criminals got way more tricks up their sleeves. Financial institutions need to be aware of risks related to fraud, compliance with regulations, but also data and privacy. 
  • Even a single entrepreneur or freelancer needs to be aware of the risks of their profession. Setting up solid contracts with clients, sticking to privacy regulations, and making sure they use safe systems is a big part of their work behind the scenes.

Having a risk management strategy in place helps you sleep at night, but it can also help you make better decisions and speed up the decision-making process. By knowing the market and elements that can affect your success, you can easily eliminate bad choices and stick to the good ones. That’s great for any type of business.

The best risk management strategies to work with

Risk management comes in all shapes, sizes, and strategies. There are several moving parts when it comes to keeping your business safe, so let’s walk through some risk management strategies to consider.

  1. Risk assessment: this is the main element: simply identifying all potential risks. You can consider the damage to your assets, your operations, but also your reputation. It can include risk assessment related to your finances and investments, like backtesting, but also check whether you’re being compliant on legal fronts. Consider this a full-body scan!
  2. Risk control: some risks can not proactively be prevented, but you could control them. You can put systems in place to minimize the likelihood of them happening, or get insurance to minimize the impact they could make.
  3. Risk transfer: some risks can be transferred to another party. This is what insurance is for!
  4. Risk financing: did your parents teach you to always have a little bit of savings in case something happens? Apply that to your business as well. Have a buffer in place for reparations or to cover potential losses for a while. 
  5. Risk governance: for investing companies, construction businesses, or other high-risk businesses, there should be a team on risk management. They should oversee if all measures are being taken (seriously) and can respond to risks as soon as they arise.
  6. Business continuity planning: what happens after the cyberattack or after the flood of your new housing project? Think ahead and create a plan to quickly resume mission-critical functions, to keep your business alive.
  7. Incident response planning: don’t just go ‘oops’. Make sure you have a plan in place that helps you put out a response to stakeholders and customers after an unexpected event, to keep your reputation up.
  8. Risk acceptance: some risks you’re just going to have to accept. You can’t control the weather or the market. It’s good to still be aware of these risks though.

As you can tell, you probably want to have a mix of these strategies up and running, depending on what kind of business and risks you have. Be realistic and learn how to prioritize, so you can eventually build a rock-solid risk management strategy.

Getting help with setting up your risk management strategy

Let’s say you’re the CEO of an e-commerce startup. Or any other startup. You want to make sure that your precious business is protected from all the risks out there and that you are prepared for anything out of your control. Here’s how to get started with risk management: 

  1. Identify potential risks: The first step in risk management is to identify potential risks to your e-commerce business. This can include risks related to online security, data breaches, fraud, and more. To identify these risks, you might conduct a risk assessment, which can involve interviewing employees, reviewing past incidents, and analyzing industry trends.
  2. Prioritize risks: Once you’ve identified potential risks, you’ll need to prioritize them based on their likelihood and potential impact. This will help you focus your efforts on the risks that pose the greatest threat to your business.
  3. Develop a risk management plan: With your risks identified and prioritized, you can begin developing a risk management plan. This should include strategies for minimizing or mitigating the risks, such as investing in security software, implementing employee training, or purchasing insurance.
  4. Implement risk controls: With your risk management plan in place, you can begin implementing the risk controls you’ve identified. For example, you might install firewalls and intrusion detection systems to protect against cyber attacks, or implement a security awareness training program for employees.
  5. Monitor and review: Risk management is an ongoing process, so it’s important to regularly monitor and review your risks and controls. This can involve conducting regular audits, updating your risk management plan as needed, and monitoring industry trends for new risks.

Protect your assets, employees, and more

Risk management is not an unnecessary luxury, for any type of business. It is just as important as playing into market opportunities and should be on top of your priority list. What’s your business’s biggest risk factor?

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