Risk management in the office is a daily challenge for leaders working in any industry. Risks can be severe like potential fire in your factory/plant and theft by the company’s senior administration staff or minor like employees using the business time to handle their matters. This article will discuss how to identify high business risks at the workplace that we, as leaders, need to be careful of.
To handle risks, we must first identify the hazards that can potentially occur in the office. Risks are some events that may take place in the future and cause adverse business impacts on the firm. To identify threats, particularly those with high adverse effects on the firm, we utilize the expertise and knowledge of our skilled employees who operate the business processes, factory/plant equipment, or units. This can be effectively carried out through proper facilitation or brainstorming. The facilitator, given the charge to carry out this assignment, is someone who should be skilled in the facilitation process. Also, he/she must have the ability to lead the participants in the brainstorming session, especially the participants who are senior management staff.
I remembered an incident when I was given the assignment to facilitate a group discussion attended by a CEO (Chief Executive Officer) and several Senior General Managers. The CEO did not want to participate in the initial stage of the group discussion. I felt that he was trying to assess whether I understood what I was doing. To dodge his resistance, I had to explain calmly to him on the process of obtaining inputs from the other group members. As soon as he was satisfied that the process was working and he was not misusing his time, I could not keep up with him as he was giving some brilliant ideas at a breakneck pace.
In a regular brainstorming session, the group can quickly identify many risks in the firm. It will be quite a challenge to manage the hundreds of business risks recognized. Consequently, we need to prioritize. Prioritization involves managing business risks that have High Seriousness when they happen. What are these risks? We can consider risks with High Seriousness if the dangers have negative implications on plant production, compliance to laws & regulations, Health Safety & Environment, and the business image.
The other standard in risk prioritization is to recognize the likelihood or possibility of the business risks happening. Will business risks occur? Are existing preventive plans put in place by the organization sufficient and adequate? A good example would be a business risk of “Late Delivery of critical equipment” required for a new plant.
If this critical equipment is presented late, it will severely affect the new plant’s completion, thus affecting the planned production followed by business loss. One of the preventive actions of minimizing the likelihood of this risk happening chosen by my firm is to have a Liquidated and Ascertained Damages (LAD) clause in the agreement with the equipment supplier.
The objective assessment of the hazards identified the seriousness, and the likelihood of the risks happening can then be captured in a Risk Map. The Risk Map is then used as the primary reference for managing high market risks in the firm.