What is risk management?
A risk is anything that could hypothetically effect a business project’s timeline, performance or budget.
Therefore, risk management is the process of pinpointing, considering and then responding to any risk that arises over the roll-out of the business project or business change to help it remain on track and meet its goal. Risk management isn’t just a reactive measure though; it should be part of the planning process to assess risk that could potentially happen and how to control that risk should it materialise.
Embracing risk for every opportunity
Smart business owners will embrace two types of risks for every opportunity – decision and change. Initially, they decide on a direction they want to take, and then they make changes and innovations to keep growing.
The above inspiration is according to a book published in 2013 by successive entrepreneur and former race car driver Tom Panaggio, “The Risk Advantage: Embracing the Entrepreneur’s Unexpected Edge.
At Yorkshire Change we strongly believe: If you want your business to innovate in order to grow, you must support your employees to take risks.
But, how do you inspire risk taking while still looking out for the financial security of your business?
The way you balance risk and opportunity is to look at them as coming as part and parcel of one another. Obviously, you are looking for the opportunity part be greater than the risk element. That is why risk management from the very start of every project is key.
It’s vital to remember too that projects are always prone to change as they progress so the risk management process should be receptive to change and the risks should be re-assessed periodically if the project is long or multifaceted.
Risk and opportunity must be balanced
Risk and opportunity management deals with uncertainty right from the start. When you are changing your business processes or innovating the business, your task is to achieve a proper balance between opportunity and risk, while acknowledging one is not the complement of the other.
Great business leaders have learned how to sensibly gauge and manage both opportunity and risk by taking a methodological approach to change:
1. Identify the issue and related change required
You may realise that a change is required if you review your internal processes, or if an employee brings to your attention, an area that could do with streamlining in order to function better.
First of all, you will want to ascertain who the key stakeholders are in relation to the planned change. It is then essential that you get buy-in from the stakeholders on why the change is required, what the broader issues are, and in which context the change can be executed.
2. Assess key risk areas
When you are analysing the risk areas concerning business change, you can start by considering the following topics:
Past Roadblocks – Did your business try a similar change previously and failed? What roadblocks caused the failure and is it likely they are still in place?
Finances: What are the forecasted costs of executing the project or change? Can the business cover these costs?
People: Do you have the right talent in place to evaluate, execute and oversee the change? If not, do you have a plan in place for finding suitable people? (e.g. paying an external consultant)
Timing: Do proposed timelines fit well with your business runs, seasonal demands, and the current workload of people involved.
3. Gauging whether the business is ready for change
Is it the right time for your business to embrace change? This will hang on the culture and attitude towards change in your business.
In some instances, businesses are change ready and prepared to take on the risks that accompany change. In others, you may know already that you will face resistance to change.
Are strategies in place to handle resistance, so that all stakeholders are on board with positive attitudes?
Additionally, you might want to consider, what else is happening in your business right now? Are there other areas where change or risk are already taking place?
Taking some time to consider the above will help you gauge how change-ready your business really is.
Reducing the probability of assumed risk
Forward-thinking business leaders will classify and map strategic new opportunities based on market insights and emerging technology.
The potential risks in fresh opportunities are typically not obvious, so the challenge here is to reduce the probability that the assumed risks will happen and to improve the company’s capability to manage or contain the risk events, should they occur.
Business growth and risk-management
We now understand, that the way you scale your business is a big balancing act between risk and opportunity. You can choose to grow your organisation naturally, or pull all the stops out with big capital investments for volume and reach.
Risks come with both – Grow too quickly, and risk taking on too much, so the quality and delivery ability suffers, or go too slowly, only to be overtaken by your competitors or new technology. In business, you must find the balance. 8
Once you start seeing innovation and change through this methodological lens it becomes much more manageable and predictable. The result is a positive attitude to growth and risk, increased opportunities and consistent end-goals.
Creating a solid strategy is the foundation of good quality risk management, hence why our free consultation is a great place to start if you are looking to ultimately get the best out of change