The environment in which a company operates will eventually affect it in one way or another. This is inevitable. In this context, the organisation can find opportunities for development and growth, but also faces risks that must be foreseen and detected to put appropriate measures into place as soon as possible to prevent them or reduce their consequences.
Risk assessment and management tools play a fundamental role, as choosing and managing them correctly is the key to managing risks properly, preventing them from getting out of control and endangering the viability of the company, its profitability, productivity and, in some cases, its very survival.
What is a business risk and what types can we encounter?
A business risk is the possibility of damage to a company occurring unpredictably. In addition to their random nature, risks are dangerous because of the wide range of types that exist, which means that the danger can come from many different sources.
Most risks that affect companies can be associated with one of the following groups:
Internal or inherent risk. This group includes risks related exclusively to factors involving the company itself, such as quality management, production processes or the functioning of human resources.
Market risk. The general market situation of the area or sector to which a company belongs may affect its sales, value and listing.
Operational risk. The possibility of suffering financial losses due to a human error, process failures or other unforeseen events.
Technological risk. The possibility of suffering a cyber-attack or a serious computer failure that involves serious risks such as: theft of data from the company or third parties or sabotage of the company’s software that makes it difficult or impossible to operate normally.
Legal risk. The possibility of fines or penalties for non-compliance with laws or regulations, negligence, civil liability issues, etc.
Financial risk. This type of risk is associated with market fluctuations, cash flow, failed investments, etc. that can affect the company’s financial viability.
These are the risks that companies are most likely to experience, although there are others, such as audit risk, that arise because of poor advice or inappropriate recommendations by third parties.
How to manage risks: the best tools for risk assessment and diagnosis
The variety and complexity of potential risks make it essential for companies to use diagnostic tools in order to identify them correctly, assess their potential scope and take appropriate measures.
More effective tools for risk diagnosis
The following are some of the most effective methodological systems and diagnostic tools to identify the risks faced by a company or professional:
Process analysis: The main objective of this system is to detect operational risks in the company’s protocols and work processes in its day-to-day operations.
Questionnaire: The idea is to involve workers in the detection of potential risks that the company’s management is unaware of or has not considered. It takes advantage of employees’ experience and thorough knowledge of their day-to-day work to ensure that potential threats do not go unnoticed.
Brainstorming: This method is similar to a questionnaire but, on this occasion, the identification of potential risks is oral, debate and discussion being encouraged among employees according to their position in the company.
Benchmarking: Risk detection based on comparison with other companies in the same environment or sector in order to identify common risks.
It is important for the identification and analysis of risks to be integrated into the company’s general objectives and for all threats to be systematically classified and structured with reviews from time to time. In this way, we can prevent failure to update our information leading to vulnerabilities that could endanger the company’s tax or financial position, productivity and/or viability.
A final important recommendation regarding the treatment of risks is to try to transfer the risks to the insurance market, through one of the many solutions that can protect a business against unforeseen and accidental situations that could jeopardize its continuity.