Risk Management 101: 5 Step Risk Elimination Process

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Risk management is the toilet plunger you have in your bathroom. While things usually go down the plumbing in a swift, smooth movement, sometimes things don’t go as planned. Knowing this, you keep the plunger in the bathroom just in case, so that you may correct things quickly, easily, and with minimal damage. Sorry for the bathroom talk, but for some reason a toilet plunger was the first metaphor I could think up for risk management. When it comes to risk management in business, you want to have a plunger for just about everything that could possibly go wrong to avoid not only crippling costs, but severe liability.

Risk management involves forecasting and evaluating the potential risks associated with your day-to-day operations, while actively identifying ways to reduce them or minimize their impact on your business. Anyone can be involved in risk management, so long as they are well-rehearsed in identifying the potential risks associated with the business.

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Most risk management techniques follow the same basic 5-step model:

  1. Identify the risk. This one has the potential to be the most difficult, as we don’t always know what we’re looking for. Because risks have a great deal of uncertainty, it can be difficult to pinpoint what exactly could pose as a risk in a business. Fortunately, there are plenty of free resources to help educate businesses about the risks that might be overlooked in their business, such as the OSHA Hazard Identifying Tool or free checklists. You can also hire a safety professional to audit your work site or business. They’ve been trained to identify potential risks and hazards, and can offer suggestions on how to correct them.
  2. Analyze the risk. Analyzing a risk can help you identify the potential severity of a risk so that you may complete the next step of…
  3. Prioritizing the risk. Prioritizing risks can help you allocate your resources to risks that pose a larger threat on your business as opposed to smaller threats with less severe consequences.
  4. Treat the risk. This step obviously varies by business type and typically requires a certain strategy to eradicate the risk. The expansiveness of the strategizing is dependent on the threat the risk poses on the business. For example, if a threat to your business is an employee safety breach, then the business would want to strategize the ways in which it could promote a culture of safety with adherence to safety compliance. However, if a threat to your business is the state of the economy, then more extensive risk response planning might  be necessary such as consulting with insurance companies.
  5. Monitor the risk. Exactly what it sounds like; you keep an eye on the risk so that you may respond and react in a timely, efficient manner.
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Now that you know what risk management entails, you can encourage employees, other managers, etc. to participate in risk management by vocalizing when they see a potential risk. Get started today, and avoid risky business!