‘What’s the worst that could happen?’ is so often asked in risk planning and risk management. And while it’s a perfectly reasonable question, it can set imaginations running, with apocalyptic scenes, terrorist attacks and debilitating disasters around every corner.
In reality, disaster planning is one of the smaller elements of risk management. Identifying the things that are crucial to the running of your business, then looking at the potential for those things to derail is a better place to start.
The type of industry you are in will impact the way you look at risk. A business working in construction will often focus on Health and Safety, whereas an Independent Financial Adviser will worry about FCA Compliance. But the full range of risks faced by firms is much wider and it’s important to think broadly rather than just focusing on the obvious concerns. All too often, companies miss vital areas from their preparations and pay the price further down the line.
Here are some of the less obvious risks that companies fail to consider:
Succession
One of the vital elements of risk management is considering key people the organisation is dependent upon for its success. Would your team know what to do if you were seriously injured in an accident on the way to work tomorrow? Have you identified a successor and transferred knowledge to your management team? Key man insurance alone is not enough. Your organisation should have emergency succession planning, not just at board level, but for any individuals and roles that are integral to the continuity of your business.
2. Mind the gap
“But we’ve got it covered, we’ve got insurance.” Sure, it’s a good start, but is your insurance cover sufficient? You might have property and liability insurance, but do you have business interruption insurance to cover lost income if you are required to close your doors for a period of time? Just because you have insurance to cover cyber attack, you should still do all that you can to prevent it. Don’t allow insurance cover to lead to corporate complacency; the effects of business interruption extend well beyond the initial financial impact.
3. Supplier issues
Outsourcing is one of the top operational risks organisations have to contend with. It’s not enough to think about the risks directly associated with your business, you should also look at suppliers you outsource to. There are countless examples where the reputation of global firms is damaged because of the practises of their suppliers. Equally, what would happen if one of your suppliers failed? Would operations grind to a halt or do you have a backup plan in place?
4. Insider threat
Occasionally members of staff betray the trust placed in them. This can have catastrophic results. Effective management of people risk can strengthen your competitive position. Insider threats are wide ranging and can be intentional or accidental. Consider the information your employees have access to and what might happen should that information get into the wrong hands.
Hindsight is not foresight
Just because something has gone wrong in the past, it doesn’t mean it will happen again. Analyse other events, but don’t be so distracted that you focus on those alone and avoid other more obvious risks. Equally, just because something important has survived through previous difficulties, it doesn’t mean it will survive if similar issues present in future. Too often people make decisions based on past experiences; don’t allow yours to negatively impact your planning.
Continuous evolution
Risk management is essential to keep a successful business of any size operating smoothly. But it is by no means a one off, box ticked type of activity.
No forecasting model can predict the future across all organisations and no organisation carries exactly the same risks as another. Risk management should be a continuously evolving process and an integral part of your business culture.
Even when you’re sure you’ve thought of every eventuality, be sure to go back over your plans and ask the question ‘what could I have missed?’.