As an entrepreneur, you’re familiar with the ups and downs that come with owning a business. However, no matter what size your current company is, the potential impact on your future is a genuine risk when something goes wrong. To address this threat to your livelihood, you must have a risk management plan in place, and creating one should be a priority when starting your business.
What Is Risk Management?
When you assess the liabilities your company faces and how to mitigate them, this is risk management. You may have already performed market research to determine the demand for your services and products, but you also need to do so when it comes to potential business threats.
When you have all this information gathered, you then put together an action plan to follow to minimize and address risks to your livelihood. This road map will be the basis for any procedures you create to actively avoid and deal with your identified liabilities.
Risk management is not a one-and-done event, but an ongoing assessment of your business risks as your organization grows.
Why Risk Management is Crucial to Your Business and Employees
Creates a Safer Workplace
Whether you’re an owner, managing partner, or CEO, ensuring the health and safety of your workplace is a top priority. Using risk management to seek out hazards to your team is essential. In addition, you can look at your loss and injury reports to implement new mitigation strategies and hopefully prevent accidents from recurring.
Reduce Costly Surprises
You aren’t a psychic that can predict the future and avoid every risk that comes your way. However, risk management planning educates your staff about recognizing signs that something could go wrong. Furthermore, this empowerment ensures you’ll already have a process in place to deal with this liability should it occur.
Save Valuable Revenue from Waste
Whether an employee slipped and fell on the stairs in your building or has been vandalized several times, a risk management plan can prevent these incidents from occurring again. By reviewing company data regarding previous accidents, damage claims, and other recorded losses, your risk department can recognize high-frequency events and take steps to minimize these losses.
Prevents Reputational Harm
Your company’s many risks could include reputational damage if an incident is brought to the public. For instance, if your workplace frequently reports accidents causing employee injuries. A risk management plan can guide your safety team and workers in addressing on-the-job hazards and avoiding getting hurt.
Create a Culture of Safety
Everyone involved in your risk management efforts will help create a safer organizational culture. From your executives and decision-makers to your frontline employees, having a unified mindset centered on prevention and safety is crucial to compliance.
How Business Insurance Enhances Risk Management
When the liabilities your company faces have been identified, business insurance is the best way to transfer this risk. You probably started with a Business Owner’s Policy (BOP) when first starting out, which usually bundled the following coverages together:
- General liability
- Business Interruption
- Commercial Property
You likely purchased a workers’ compensation policy when you hired employees because of the protection it offered should someone get hurt on the job. This coverage is required in all states but one and provides essential medical and income benefits to your workers should they sustain injuries while performing their duties.
If you haven’t bought this insurance yet, don’t let concern about workers comp costs dissuade you. On the contrary, it’s a worthwhile investment when you consider how much an uninsured workplace accident could cost your bottom line and future.
Create a Risk Management Plan in Three Steps
Ready to create a comprehensive risk management plan and take control of your business liabilities? The three steps below can get you on the right path to mitigating these threats and creating a safer workplace and company culture:
Identify Your Business Risks
As mentioned earlier in this article, risk management planning relies on knowing your risks. Therefore, you and your team should thoroughly evaluate potential risks that could directly or indirectly impact your business. These could include dangers to your everyday operations, employee safety, regulatory risks, financial threats, and more.
Consider asking employees from different departments to fill out a survey to identify concerns they feel are an issue to your company’s well-being and their own.
Evaluate the Impact of Your Liabilities
So, you have a long list of potential risks you’re worried about, so now it’s time to analyze exactly how your company could be affected by them. For instance, if a key team member operates a dangerous piece of equipment, what safety protocols should be in place to prevent this from happening?
If they got hurt, who could take over their role? Would production experience a significant backlog? Ask yourself and your team these crucial questions to better understand what’s at stake.
Mitigate Your Company Risks
This is the final stage of your risk management planning. You should take the information from the previous two steps and create actionable steps to address your business’s liabilities. For example, you may decide that a safety committee should be formed to onboard other employees on procedures for avoiding accidents or making mistakes that could result in a customer lawsuit.
The Bottom Line
Depending on your industry, assessing your risks can be a significant undertaking, but it’s key to creating a comprehensive risk management plan. This is a crucial aspect of your business management process and will provide yourself, customers, workers, and other decision-makers with the best possible mitigation guidance. In return, you’ll find your yearly productivity averages rise and enjoy an increase in revenue from the savings on damage and injury claims.