Use our risk analysis template to identify the potential risks your business might face and how you can control or minimise these risks.
Risk analysis template
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There is no doubt that 2020 will go down as a year to remember. While the Covid-19 pandemic has had an enormous impact, the year has brought many challenges — from the forest fires in Australia at the beginning of the year to the Taal volcano eruption in the Philippines — followed by a long list of high- force hurricanes and widespread social unrest here in the US. All of these have highlighted the reality of persistent, disruptive volatility.
And there is no reason to think that volatility will decrease; in fact, it is only likely to increase. As Matthew Bishop, an editor from the Economist, said in 2015, “In the rest of our lifetimes the pace of change will never again be as slow as it is today.” Within the last 20 years, we have seen the dot-com crash, the attacks of 9/11 and the global war on terror, the global financial crisis and now the pandemic. Extraordinary events are becoming the norm.
No individual or organization can predict specific risks. But organizations can and need to prepare for an uncertain and volatile future that includes climate change, technological disruption, geopolitical risk, threats to the global supply chain, and issues related to cyber-crime, data protection and privacy. As we have seen during the pandemic, some modern business practices (such as globalization and just-in-time inventory management) create risks of their own. And regulatory authorities around the world continue to evolve and expand their scope, addressing matters such as data protection and privacy along with money laundering, financial crime, violations of sanctions, bribery and corruption.
The problem of maintaining business operations in an increasingly volatile and complex business environment calls for proactive, integrated solutions encompassing people, data and infrastructure. Organizations should establish well-defined direction from the top level so that there is clarity on how to act when challenges arise.
· Connecting risk management more closely to business and front-office operations. Organizations need to move at a rapid pace to deal with risks as they evolve, and this can’t be accomplished if risk management is sequestered somewhere in the back office.
· Getting better leverage from technology. Emerging technologies such as machine learning and artificial intelligence show great promise in helping risk managers pinpoint specific risks and develop faster responses. Many risk teams, however, have yet to take full advantage of more mature technologies in areas including data, analytics and modeling. Among other benefits, these technologies can reduce the efforts on lower-risk areas and help managers focus their energies on real threats, to critical parts of the organization.
· Aligning risk policies with business strategy. Many risk management failures indicate the right policy in support of the wrong strategy. Risk should collaborate closely with business lines and the overall enterprise to reach consensus on how risk is defined, measured, controlled, and mitigated. Collaboration also helps reduce duplication of effort.
· Being active, not passive or reactive. Risk managers need to do more than identify and mitigate potential risks. They can, for example, tap into external data sources to identify digital signals that provide early indicators of potential future problems. New technologies can help turn this data into insights and unearth previously un-seen business threats or opportunities.
One additional consideration: Risk leaders spend a lot of time considering how the function is structured and where it fits within the organization. While there is no “one size fits all” answer, the ability of risk managers to function effectively on a highly decentralized basis during the pandemic demonstrates how this issue has become somewhat of a red herring. Enterprises need central controls, but they also need what we call “sensors at the edges” to provide objective input from the front line and from outside the organization.
Organizations are still dealing with the effects of the pandemic, but most are beginning to plan for whatever “business as usual” will look like going forward. Better risk management may not spot the next big disruptive event, but it can accelerate and shape a more effective organizational response to whatever waits for us.
Risk management is a process dedicated to identifying risks within a business and developing procedures to mitigate or eliminate those potential risks. An effective system helps maintain the safety of staff, whilst protecting business resources.
When asking ourselves why risk management is important we need to consider the scope of risk management. Risk management involves identifying potential risks and hazards to staff safety and then putting in place procedures to minimise those risks. With this in mind, the importance of risk management is absolutely paramount: not only does it protect your staff from physical and mental harm, it also ensures the profitability of your business by reducing downtime and costly payments.
Risk management is an essential part of effective business planning and organisations are expected to provide a safe environment for workers. Work Health and Safety (WHS) regulations often play an instrumental part in risk management. WHS governs the regulations behind what’s an acceptable practice and what is not.
A specific and detailed risk management system is a vital investment for all businesses. We’re going to cover the benefits of both risk assessment and risk management and explain four crucial reasons why they’re important to your business:
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- Risk assessments save your business money
- Risk assessments reduce the chance of injury in the workplace
- A risk management plan protects your company’s resources
- A risk management plan improves your company’s brand image
The importance of risk assessment in business
Risk assessments save your business money
Businesses invest in risk management systems to mitigate the risk of spending thousands of dollars in financial, legal and internal costs.
Effective risk management plans look beyond improving one area of the workplace. They encompass all aspects of an organisation including; safety, financial, business and environmental risk management. Here are the main cost benefits of risk assessments:
#1. Risk assessments reduce the likelihood of a workplace accident – Safety audits and inspections help businesses identify areas to improve work processes, signage, or training.
#2. Risk assessments reduce and prevent fines, lawsuits and penalties from non-compliance issues – Every organisation must comply with its State’s WHS legislation.
#3. Risk assessments show employees the business cares about their safety – Your staff are a valuable business resource. Provide them with knowledge and responsibility around improving your safety management system — not only will this lead to improved safety it will also boost morale by demonstrating your trust in them.
Risk assessments reduce the chance of injury or mishandling in the workplace
Every workplace has hazards. As an employer or business owner, it’s your responsibility to impose risk assessments to protect employees against WHS hazards.
According to Safe Work Australia, there are Four Steps in the risk management process:
Step One: Identify risks
Step Two: Assess risks
Step Three: Control risks
Step Four: Review control measures
Source: Safe Work Australia
Understanding these steps can reduce the number of injuries, hazards and risks in the workplace.
Step 1 of the process involves assessing the risks and mapping out situations that could potentially cause harm to people or resources.
Step 2 involves conducting a risk assessment based on factors such as:
- The severity of the risk
- Whether any existing control measures are effective
- Actions needed to be taken to mitigate the risk
- How urgently the action needs to be taken care of
Step 3 involves putting controls in place to prevent the risks from happening and what to do if they do occur.
Step 4 comprises of reviewing the process to identify any other opportunities or risks that may have been missed.
By carrying out this four-step process, you have the ability to mitigate or eliminate risks from your workplace before they even occur. The first risk assessment you carry out will be the most resource-intensive, since you need to do a review of your entire work system and processes. Year on year, the process becomes more efficient and processes will continue to be refined and improved.
Overall, risk assessments take more time, energy and resources when first implemented. In the long run, they reduce the number of injuries, hazards and risks in the workplace.
The benefits of risk management
A risk management plan protects your company’s resources
Risk management plans don’t simply identify risks, they make it possible for organisations to prioritise them. As previously discussed, Step Two of the risk management process involves assessing the risks (see diagram above). This is often done on a likelihood/impact matrix to help identify which resources are a priority and how quickly the risks need to be responded to.
Here’s an example of a risk matrix:
Source: Pinterest
Your business has a valuable company resource; if an incident occurred in the organisation that impacted this resource, it may have a detrimental impact on the overall business processes and performance. Let’s assume the probability of the risk occurring is moderate. By looking at the matrix we can see this is a ‘high’ risk, priority area. A business would apply the matrix to all risks identified in Step One.
Identifying a course of action for each risk saves the company time, money, and physical resources.
A risk management plan improves your company’s brand image
Workplace incidents can lead to major PR issues such as negative publicity and a distorted brand image. For example, AGL Energy faced a coal seam gas protest. In 2013, people protested about the hydraulic fracking process AGL participated in. As a result, the company put on hold the development of 66 coal seam gas wells in Western Sydney.
When a business creates a risk management plan, it sends a positive message to stakeholders and the community. Employees feel confident they are working for a safe and responsible company and customers have assurance they are conducting business with a professional and proactive organisation.
Overall, risk management plans show that a company is reputable and holds itself to a high standard.
Creating a Risk Management System
Now you know why risk assessment is important, create a risk management system for your own business. Risk management plans are an effective, actionable process that will save you money, reduce the risk of a workplace injury, protect your business resources and enhance your brand image.
At BusinessBasics we can take the pressure off any business that wants to create an effective risk management system — whether you need a consultant to assist you with your system, training for your team or an audit of your current safety management system we’ll show you how to maximise your risk management.
We provide the following WHS and Environmental Risk Management Plans:
- Full safety management
- WHS and Environmental Risk Management Plans
- Safety and environmental audits
- Review of your supplier and subcontractor management plans
Get in touch with BusinessBasics if your management team would like to discuss other ways to create a more productive and efficient workplace.