Risk is an ever-present part of any business operation, with business interruptions scoring 50% of all business risks, while other serious risks for businesses and their reputations, like cyber threats, growing more prevalent every day. While you cannot avoid all risks entirely, business owners can take steps to reduce their prevalence by reducing vulnerabilities, detecting risks, and acting quickly to reduce their impact before encountering widespread damage. The shortage of a skilled workforce with extensive risk-management experience, increasing incidences of cybercrime, and loss of brand value are other examples of risks with the potential to cause havoc. Putting measures in place to avoid or reduce the impact of such occurrences is essential. Here are some ways to detect risks that expose your company and damage your brand.
Detect risks quickly
Use tested risk models or software
Over the years, businesses devised ways and means to preempt and mitigate risks, and technology plays a significant role in finding risks before they result in damage. According to research, risk management teams who adopt models to detect imminent business threats have a 70% chance to avoid them. Better protected are those who use software to simulate risk and monitor performance on a consistent basis.
For example, Simio simulation software can effectively detect risks, expose bottlenecks, and offer solutions to improve your business operation. Therefore, solutions like Simio Consulting represent your best bet for protecting your business and your brand if you are a business owner. The earlier you detect risks, the better it will be for your business operations. Ignoring them can threaten your business’s survival.
Play devil’s advocate
While playing devil’s advocate is controversial in some quarters, it’s an effective risk identification method. By taking the stance of a third person, this technique exposes business operations to strict examination in looking for vulnerabilities. To some extent, this tactic is more like taking a pessimistic stance to detect faults in the company by assuming a worst-case scenario. Usually, when you own and operate a business, it is difficult to see things from an objective point of view so it makes sense to hire an outside firm or specially trained staff for this task.
This is probably why business owners often seek the advice of a person unrelated to the business. However, when you decide to do vulnerability testing yourself, you can itemize everything that could go wrong with the company. When you adopt this technique, try to ask two crucial questions. The first is, what could go wrong with the business? The second question concerns whether there are sequential events to resolve the risk. By challenging all your assumptions about potential threats, you can build a robust structure to mitigate any type of business risk.
Make a list of industry-specific risks
Every business industry has a set of common risks faced by many or most businesses in that industry. For instance, if you operate in the culinary industry, biological hazards and cross-contamination are major risks. In another instance, the growing labor and chip shortage is a worrisome risk in the automotive industry. In medicine risks include misdiagnosis. This point aims to bring your attention to the particular risks that exist in your industry with an eye toward establishing protocols to limit these risks, such as postmortems to identify flaws leading to misdiagnosis and death or establishing protocols for handling and storing food. The more knowledgeable you are about your specific industry, the easier it is to detect and resolve risks.
A more important point to consider is the prevalence of these risks in respective industries. Sometimes also, national economic indicators can trigger industry-specific risks. When this happens, most (if not all) companies in that industry have to deal with risks in the same period. For example, auto retailers feel the pinch in car sales when fuel prices increase. Thankfully, having a ready list of solutions or measures to resolve known risks can reduce the inconveniences.
Conduct an internal research
This is one of the easiest ways to detect risk in your business. Conducting internal research requires the cooperation of your staff as well as access to data collected from various business operations. Feedback from your staff contributes to how much you find out about the business since they have access to the daily operations of your business. Setting up a routine procedure for gleaning problem issues or establishing a policy that rewards employees for reporting potential or actual problems helps you learn about vulnerabilities that might not come to your attention as their supervisor. For example, when your marketing department consistently records abnormally high costs or declining conversion, you need to know about this fast and find a solution. Because marketing often experiences normal fluctuations, you may not detect the problem until major damage results. Remember that your workers are your internal eyes and ears, and if you treat them right, the benefits are immense.
Also, routinely monitor your data. If you don’t collect the right data, this is harder. Hence, it’s critical to think deeply about what data you need to ensure you can effectively monitor risks. It’s often expensive or impossible to track down information if not collected at the time.
Monitor your systems, especially your computer systems looking for vulnerabilities. Since employees represent the biggest threats, ensure you have adequate protections in place. For instance, train employees about phishing and make them aware when one is detected to keep them hypervigilant. Also, have policies such as requiring new passwords at frequent intervals and blocking access for employees once they leave your company.
Conduct external research
Logically, any business conducting internal risk research will follow up with the external. This involves your clients, customers, suppliers, other businesses within your industry, etc. The interaction with these stakeholders makes them a prime group to solicit information. You can consider them a third-party entity that sees things objectively and without bias. A school of thought suggests that competitors can provide all the risk information you need. In many industries, it’s common to hold routine conferences bringing together risk management staff to share vulnerabilities and solutions used by any member.
Contacting suppliers and other stakeholders directly to request the information you need may not be possible in all situations. However, you can pay attention to what they do, especially by focusing on their challenges. For instance, if you start to record low sales, your observation can prompt you to set risk-mitigating measures for your business.
There are other ways to gather research, such as analyzing customer complaints. How well do you pay attention to your customers’ feedback? Do you take the time to analyze the customer service department’s complaints? If not, you might want to do so since they are rich information resources for business owners.
SWOT analysis
SWOT analysis is a widely known method when detecting risks. It represents Strengths, Weaknesses, Opportunities, and Threats. Using this analysis opens up your business operations in a way you probably never envisaged. By categorizing your company operations under these headings, it is easier to understand all the key areas, both internal (strengths and weaknesses) and external (opportunities and threats) that impact your business. Under ‘Threats,’ your team can preempt dangers that can halt business operations or damage your reputation.
Additionally, conducting a thorough SWOT analysis is an opportunity to determine hidden risks that take the appearance of weaknesses. SWOT analysis is a multi-pronged approach for risk detection. According to successful business owners, an annual or biennial assessment can provide maximum protection for businesses. In other words, the more frequently you conduct a SWOT analysis, the more your business benefits. Therefore, make effective use of it during your processes.
Conclusion
Finally, when dealing with business risks, it is better to detect them early. Robust risk assessments can also offer your company a great deal of protection. The last thing you want is to have a business you worked hard to create come crumbling down.
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