Business Risk Management ? Why Do You Need It?

Posted by Ankit Kohli on October 30th, 2015

Business risk management is an integral part of running a profitable enterprise. Most entrepreneurs whether owning large or small businesses secure their operations by investing in business risk management tools. The introduction of newer business risk management software and tools have allowed the management to understand the risks better, define them more appropriately and plan their operations accordingly. Business owners can now forecast the potential risks from forthcoming events and take necessary steps to mitigate them.

Companies are now hiring services of agencies providing advanced business risk management monitoring so that their operations are more risk-free and secure. These vendors are helping enterprises avoid any catastrophe from lack of any necessary measures that reduce and manage risks. With the inception of business risk management practices, companies can now easily forecast the risks from future situations and take adequate measures beforehand to prevent any loss.

Significance of Business Risk Management

Business risk management covers various facets of a business including operations, finance, strategy, environment, safety, health risks, etc. It is the job of the business risk expert to track all these aspects and pinpoint their consequences so that the business can take measures to remain safe. Though small organisations generally have one or two experts to keep a tab on risk management, larger businesses usually employ a team of experts to monitor and control the risks.

Production Monitoring

These experts constantly monitor the production, supplier pipeline and the overall process to track potential risks to the businesses. They focus on finding glitches within the management function that can lead to a future problem. These professionals monitor and align the production and overall operations with pre-defined parameters. This helps to check for discrepancies and fix them immediately. This prevents any potential losses before they can cripple the production or service delivery model.

Supply Chain Management

The risk managers monitor the production and supply chain of the business as an integral part of the whole operation so that clients are serviced as required. This also helps prevent possible complaints from clients. They check the proper supply of raw materials, its transition from the source such as the manufacturer or the OEM to the designated factory floor and assembly line. They monitor suppliers for any problems that may hamper production and increasing costs. All findings are reported to the senior management for subsequent action.

Inventory Management

Risk managers also keep a tab on the storage of raw materials and stock. Before the stock is supplied to clients, it is important to keep it secure from theft, fire, environmental damage and pests. They take proper measures to prevent stock losses until the goods are delivered to the clients.

Health & Safety

The managers additionally take care of the health risks of the employees. They arrange proper insurance for the workers especially if they are working in the high-risk zones or deal with hazardous chemicals or high voltage electricity.

Other Factors

Business risk managers also check for other factors such as adherence to laws and regulations, labour relations, macroeconomic factors, architectural safety, security and control, etc. They help frame operational and management policies, define control factors and operational procedures to check for deviations from the control process, and check for discrepancies that may result in increased risk.

How to go about business risk management

Having risk management experts in-house is imperative for all businesses, in today’s competitive world. These experts should also be equipped with adequate risk management tools to capture data related to production lines, supply chain, inventory, environment management systems, health and safety management systems. With access to all this data and using their expertise, they can help the organisation stay ahead of the upcoming risk’s.

Most modern businesses also relying deeply on certain critical suppliers for their operations, and ensuring that these suppliers remain risk free and deliver as per expectations. However, the internal risk management experts, might not be able to guage the risk exposure of these suppliers, due to lack of information and expertise on supplier’s businesses. Therefore to cover this important area of business risk management, organisations would be well advised to invest in business risk management providers to ensure trouble-free supply chain and increase its revenue growth rate.

About the Author:-

Pure Research provides customised research and business intelligence to corporates, public sector organisations, financial services firms, and professional services firms worldwide.  The company delivers high quality procurement and supply chain intelligence to procurement professionals and their organisations. It provides business and market intelligence to strategy and marketing teams at corporations, and to professional services firms. Pure Research also provides customized financial research and ESG research to financial services firms. Analysts from Pure Research work as an extension of their client organisations to deliver high quality research and insights. The company has offices in London, U.K. and Delhi, India.