Risk Management 101: Protecting Your Business Against the Unexpected

Requirement 1: Understanding Business Vulnerabilities

Your vulnerabilities as a company are those things that present a threat to your continued success if something beyond your control should go wrong. These include things like disruptions to your supply chain, data breaches, and accidents involving your employees or vehicle fleet. We’ve all seen in recent years how unforeseen circumstances can arise and present a challenge to your ability to keep operating as normal. Even the most well-managed business can be forced into a tailspin by something happening out of the blue.

It’s important to understand all of the ways your business can be put under pressure. Look at all of the external influences on it - your relationships with suppliers, ability to get employees to and from the premises, the possibility of high-performing employees being headhunted, and more besides. Think of how your business could come under pressure on these fronts, and have a strategy for dealing with them. Although it seems like negative thinking, businesses that imagine how things could go wrong are better-prepared for those occasions when the dice fall against them.

Requirement 2: See the Value of Insurance as a Risk Management Tool

It may not be possible to see the unfortunate incident coming, but it is possible to soften the landing in advance. Insurance is a cost that goes on the liabilities line when you’re doing the accounts, and it may look like one you’d like to reduce - but bear in mind that its entire purpose is to make potential future losses less serious. Even if you’re cutting costs in other areas, have the foresight to recognise that insurance is there for when you need it - and if you don’t already have it, it’s time to get it.

You can weigh the different types of insurance, because you don’t necessarily need every kind you are offered. However, general and professional liability insurance are certainly worth having, and good premises insurance is important too. If your business depends on people driving to and from places, it’s a good idea to see how much you could save with a fleet insurance quote; you’ll be glad of it should you need to take a vehicle off the road or cover repairs after an accident. Too many people only understand the benefits of insurance when they need it and don’t have it. That’s a lesson to learn now rather than after the fact.

Requirement 3: Take Proactive Safety Measures to Reduce Risk

You can’t look into the future and see what might happen, but you can be realistic and understand what does happen in businesses all over the world. Readiness for the worst isn’t pessimism; it’s learning from the things that happen to others. Health and safety as a concept has been scorned by so many people and sources now that it’s become a cliche. But the moment you dig into the comedy stories about health and safety you begin to realise that there’s always common sense behind it. Training your employees to spot and evaluate risk, implementing in-house safety protocols, and adopting cybersecurity measures is essential.

This can be something relatively small: for instance, even if you generally expect employees to turn up to the office, you could implement a system where those who are feeling ill, but capable of working, instead work from home to avoid passing the illness on. It can be more widespread; returning to the importance of your vehicle fleet, you can certainly benefit from proactive servicing of cars and vans rather than learning they have an issue after an accident. Being risk-prepared is a positive step to take.

Requirement 4: Create Your Risk Response Plan(s)

One thing that often comes out of business crises is that the initial problem can be mitigated  by a swift, informed response and equally can be aggravated by the opposite. Plans trump panic every time, and this is something that is better to know innately than to learn. Even without input from this article, or from anyone else, you can probably imagine some crises that could hit your business. If you know what those crises are, you can probably start to think about what you would do if they came to pass. The next step is to formalise this into concrete plans.

Let’s imagine that your business has been the target of a data breach. What would you do first? Who would you inform? How would you deal with questions from the public, your employees and even the media? Getting all the needed information down on paper (and on a shared file in the business network) can make all the difference between a panicked response that leads to much worse outcomes, and the business returning to normal in short order. Have plans in place for data breaches, natural disasters, accidents and, learning from the recent past, pandemics along with anything else you can think of.

Requirement 5: Be Agile in Reacting to Change

One of the biggest risks in business is complacency. You can get all of the four requirements above pinned down and, if you then congratulate yourself on how prepared you are, you may well throw all of that progress out of the window. It’s great to be prepared for risk, and by doing the above you’ll be a lot further forward than a lot of other businesses. But - and there is always a but - this needs to be underpinned by a readiness to amend plans, add insurance policies where needed, and overhaul safety measures when you become aware of the potential to do so.

Agility in the face of change is the antidote to complacency. You can’t just make changes in your plans and then put those plans away in a glass case to be retrieved in case of emergency. You should have finely-tuned antennae that see other businesses struggle and identify ways that you can avoid the same fate. The job of risk management is one that is never completely done. That may sound exhausting, but it is much more exhausting to deal with crises that develop as a result of poor preparation - and if you develop a culture of agile risk management within your business, the work will become that much easier.

The thing about unexpected crises and unforeseen circumstances is that they are just that - unexpected and unforeseen. It’s easy to deal with a clear and present problem, and takes more imagination and energy to deal with something you don’t know is even going to happen. But like insurance itself, preparing for unforeseen circumstances is a way of putting in the effort and the thought ahead of time, so that even when bad times do arrive, you’re in place to deal with them and come out on the other side stronger for the experience and ready to deal with whatever comes next. It’s a lot of work, yes, but it’s worth it.