The Importance of Risk Management
Risk Management is an essential part of operational management and success. Learn what it takes to be a successful operational manager, the importance of risk management, and how you can be more successful at achieving your goals.
Operational Risk Management
Operational Risk Management is an ongoing cycle of risk management, which includes the proper planning, assessment, decision making and implementation of risk controls, which allows a company to mitigate and avoid risks, as well as accepting certain necessary risks. It involves the oversight of risks in operations and includes that of loss which results from failed systems and processes, be they due to external events or human factors. Although there are many stages of Operational Risk Management, we will focus todays discussion on three of the foundational elements.
Stage One: Planning
The first step in risk management is planning. The better plan you have in place, the more successful your operations will be. Any good plan will allow you to identify, analyze and evaluate potential risks, and to mitigate them should they come into play. It will also allow you to determine the impact of a given risk on the costs, performance and scheduling of your operations.
Stage Two: Preparation
Preparation involves getting the steps in place to implement your plan. The right preparation will work towards the elements laid out in your plan, will communicate the plan to the appropriate people, will delegate responsibilities and set expectations and benchmarks for success. It also lays out a step-by-step implementation of the plan to make sure that each step smoothly transitions to the next, and by dealing with risks before they crop up.
Proper preparation will:
- Reduce operational losses.
2. Lower auditing and compliance costs.
3. Enable you to detect activities and operations that are illegal, unethical or outside of best practices.
4. Reduce overall exposure to risks in the future.
Stage Three: Implementation
If you have engaged in proper planning and preparation, your operations should go as smoothly as possible. With the right management strategies in place, your people at every stage will be able to effectively and efficiently deal with any risks that crop up, whether predicted or not. The entire point of risk management is to minimize and eliminate potential risks right out of the gate.
Results of Risk Management
If you have done the right management and planning, you’ll be far more likely to see success and stay on time. You will have met your budget and made all benchmarks and objectives. Without effective management of risks, you’ll see more problems, a greater chance of running over-budget and even of complete failure.
The reason it’s vital to plan for risks in advance is to maximize profits while minimizing expenses, to create a more effective workforce and improve working environment overall.
Insurance and Risk
The right insurance policy is a vital part of risk management for any business. As you evaluate the success of current and past operations, the goal is to provide better protection for future ones. There are a range of risks for any operational that can only be managed by insuring against things going bad. These include environmental disasters and financial liability. Sometimes you can’t see what’s coming, and having the right insurance can cover you in such unforeseen circumstances.
Harris insurance has over 100 years of combined experience in risk management and insurance. Our diverse team is dedicated to exceeding every customer’s expectations and supporting a legacy of quality service. For more information, give us a call today!
