Managing business risk means managing the protection of your employees, customers, property, information and the environment. Formal business risk management is a policy or program that works to prevent all types of problems arising from risk and uncertainty.
Although the actual risk management processes may be different in small and large companies, the problems that arise as a result of poor risk management are the same. Unmanaged risk creates inadequate security and safety measures, which can cause financial loss, erode profits and create unnecessary liabilities. Inadequate risk management can even scare away venture capital funding and lower your bank rating status.
Benefits of Risk Management
Risk management programs require companies to carefully review their personnel, administrative, accounting, management, financial and insurance policies. Carefully evaluated risk management policies produce both tangible and intangible benefits:
- Good risk management can reduce business and liability insurance premiums (in the same way that a security system can reduce your homeowner´s insurance).
- Formal risk management programs are frequently accepted by major insurance underwriters for the purpose of lowering premiums.
- Risk management reduces your chances of being sued and increases your chances of prevailing in a lawsuit if you are taken to court.
