Improving Risk Management

Previously I have written about management and its risks and how best to categorise it through your business to ensure your risk management system is thorough and relevant to requirements of the business. Risk Management is all about what risks the business owner or management will take into the business, which of these will be insured against, and which risks will be managed or eliminated. Underpinning sound risk management systems is the willingness to embrace a positive and open attitude to asking (or being asked) tough and confronting questions. To assist with this process I have put together some ways you can assess or improve your internal systems.

Management risk is a value add
It is not a separate process – Integrate it into your decision making processes
It is a tool to help implement your business strategies
Ask what you need to get right to successfully manage your business and achieve your goals

Establish your business and personal priorities

Set the risk thresholds for your corporate and operational strategies
Clear priorities mould your organisation’s culture and its attitude towards the business stakeholders
Incorporate measurement of the businesses risk profile at regular Director / Senior Management meetings
Decide you your business risk appetite

Establish the type and level of risk your business will carry
Communicate this to the relevant senior management within the business
Reconsider the Company’s risk appetite in conjunction with changes in the business environment
Ask questions constantly

Probe Company management regarding business performance and management in conjunction with each other
Questioning highlights the desire to be proactive towards risk management
Be open minded when asking questions and receiving the responses
Integration of risk management

High business performance and good risk management to have same emphasis
Consider risk management implications to current and new business activities
Management reports to include risk management report as well as all other activity and performance reports
Use all information sources

Get all levels of the workforce to provide information on potential risks
Talk to external stakeholders such as auditors, financiers, key customers and suppliers
Robust risk assessment can also uncover hidden opportunities to improve your business
Allocation priorities to identified risks

Identify major risks and work on these first (e.g. WHSE&T, excess debt)
Accept that you cannot manage all risks facing the business at one time
Understand the risk management processes for each of the major risks and report regularly
Risk benchmarks and indicators

Use the Company audit reports (internal and / or external reports)
Indicator information come from financial data, customer / supplier communication and scanning the business environment
Align the reporting process to the agreed indicators
Use lead and lag indicators
Use software tools to assist in risk identification, management, reporting and review

Risk management structure

Match the structure to business size and complexity
Appoint one person or small group of people to be responsible for structure, operations, effectiveness, reporting and review
Challenge management, management activities and Director activity
Have a clear agenda and policy for risk management.