Question

What are some of the risks that may be faced by an organization.

Answer 1

Organisation faces all kind of risks, which causes serious loss of profit. Organisation risk may prevent it from achieving its business goal.

Physical Risk

This includes any risks to employees, buildings and assets. Common physical risks that the business might face are fires, water damage and theft or vandalism. Physical damage will result in repair or replacement costs and can also lead to legal costs (if found liable in some way).

Examples of Physical Risk Management

• Install safety features such as fire and smoke alarms, sprinkler systems and fire escapes
• Ensure that you and your staff know where all the exits to your buildings are
• Practice fire drills to ensure everyone knows what to do in the event of a real emergency
• Take out insurance
• Increase the safety of your buildings through burglar alarms and security guards

Strategic Risk

Every business decision holds some strategic risk. You make decisions which are designed to lead you closer to your business objectives, but there’s always a risk that they won’t. This might be because the decision itself was the wrong one but could also be due to poor execution, lack of resource or changes in the business environment. This in turn can lead to a number of things such as loss of profit, poor cash flow, missed deadlines or low sales.

Examples of Strategic Risk Management

• Conduct regular competitor analysis
• Base decisions on robust research and figures
• Set clear goals and key performance indicators (KPIs)
• Identify potential risks in advance
• Establish key risk indicators (KRIs) and tolerance levels before action should be taken

Compliance Risk

Every business is governed by some form of legislation and regulation. The possibility of failing to adhere to these rules and guidelines equates to compliance risk and of course can lead to fines, prosecution and reputation damage.

Examples of Compliance Risk Management

• Staffing – ensuring you have specific roles in place to manage and enforce your business compliance
• Stay on top of new legislation and plan in advance how you will comply and what the impact on your business will be
• Staff training and creating a culture of compliance within your business
• Ensure you have the appropriate analytics and processes in place to monitor your compliance

Human Risk

Your employees themselves can create risk to your business through a number of ways. Their behaviour in the work place can create risk if they are incompetent or non-compliant, while their behaviour outside the workplace can also impact, for example, if they are misusing drugs or alcohol. Businesses must also protect themselves against the risk of fraud or embezzlement.

Examples of Human Risk Management

• Robust recruitment process and background checking
• Clear succession planning
• Rigorous staff training
• Performance Management
• Confidential Staff Support Network

Technology Risk

Technology may be the cause of some of the most common risks we face in business. These risks can range from anything as basic as a power outage through to hardware and software failure, malware and cyber-attacks. Such risks can lead to loss of time through systems and equipment not being in working order, loss or corruption of data and in some cases data breach.

Examples of Technology Risk Management

• Ensuring back-up power sources are in place
• Putting staff and processes in place to ensure technology is kept up to date and in good working order
• Installing anti-virus and malware software
• Creating a data breach plan

Financial Risk

There are a number of different ways that a business can face financial risk. Some may be internal and others may be driven by external factors such as fluctuations in the financial markets or exchange rates. Non-payment from clients creates financial risk, as does poor financial planning and projection. These risks can lead to loss of income and to a negative cash flow, which if serious enough, can mean an end to your business.

Examples of Financial Risk Management

• Financial planning and projection
• Robust reporting and analytics to monitor success
• Putting credit control processes in place.
• Credit checking prospective clients

Experian Business Express allows you to check potential clients’ credit status before you work with them so you can make sure that you only work with clients who are most likely to pay you – and pay you on time.

[Citation:Cindy Yip, 2017, read more at -https://www.experian.co.uk/business-express/hub/blog/others/6-business-risks-you-need-to-know/]