Why talk about risk management? In order to protect yourself from unexpected events, it is important that you deal with the possible risks. Therefore, ask yourself which risks could prevent you from achieving your goals. Take time regularly to review and plan ahead for risks and emerging dangers. Think about what risks may impact your company. These can be, for example, employees, work processes, facilities and finances, but also environmental factors such as new laws. Try to identify the cause of such disruptions and consider what impact they might have on the company. Based on such deliberations, you can think about how you want to deal with the identified risks. This is risk management.
With the risk management process, you can optimally prepare yourself for upcoming dangers in five steps:
1. Determine Goals And Set Boundaries
The very first thing you should do is determine for which area you want to start the risk management process. Consider not only the corporate sector, but also yourself as a private person.
What are your professional and private goals? In what time frame do you want to achieve them and by what means?
The more precisely you define your goal, the better you can identify the possible dangers.
2. Identify Risks
One of the most difficult tasks of risk management is to identify threatening risks to the company. The task is to systematically identify dangers, their triggers and their impact.
By actively documenting loss experiences and thus promoting risk awareness, you can identify future risks much more easily and take action ahead of time.
3. Risk Assessment
Once you have identified dangers and their impact, you can assess how serious the consequences are for your company. The aim is to assess the probability of the risk occurring and to determine whether it is small, medium or large. Individual factors, such as one’s own financial strength, play an important role in this assessment.
4. Risk management
After assessing the risks, you can decide how you will deal with them. In risk management you essentially have the following options:
- Avoid
Risks can be avoided by excluding certain markets or not offering risky services or products at all.
- Decrease
Safety measures can reduce occupational accidents or incisive errors.
- Transfer the risk
By taking out insurance or transferring the risk to someone else through contract conditions, one’s own risk can be largely excluded.
- Self-supporting
If you have considered the above-mentioned variants, there is usually still a residual risk that you have to bear yourself as an entrepreneur. A plan should be prepared in advance to be able to cope with such risks.
5. Control Risks
We are in a very dynamic environment where new risks are constantly emerging. Therefore, make sure that you regularly adjust your risk management to the current conditions.
