Risk is an element of every undertaking, and that includes when you start a business. When you operate a business, you need to be aware of the risks to your enterprise, so that you can take precautions to minimise or eliminate them.
Too often, entrepreneurs are so afraid of risk that they imagine it is not there. This leads them to do the exact opposite of what they should, which is to understand risk and come up with strategies to minimise it. For all entrepreneurs, risk is always there and demands ample attention.
Companies must learn to embrace risk so that they can factor it accurately into their operations; they can understand its origins and likely damage, and determine the best ways to be profitable in spite of risks. Embracing risk also helps with determining which processes and tools are needed to manage it best.
Here is some information on understanding risk better and some approaches to help combat and lessen risk at your company.
Risk Management Previously
Previously risk management was all about managing the risks you could see. You would put processes and protections in place to ensure that your company would be amply protected from whatever you could spot and understand.
During these times the focus was on getting insurance policies that would cover these areas. The approach was to get blanket coverage overall potential risks. As a result, companies would often overpay for their insurance coverage. They would buy coverage for things they might not need but was included in the coverage.
Today Risk Management Has Evolved
Today risk management has evolved because the number of risks has increased and the ability to determine where risk will come from has gotten more complicated.
Today businesses operations are much more complicated. The average SME likely uses international supply chains, sells to customers who are located in multiple jurisdictions and has to contend with international laws and regulations around how they operate their businesses. Also, many of these businesses face risks that are uniquely specific to them. They require a customised set of approaches for their companies.
Insurance Companies are at the Forefront of Risk Management
Insurers have recognised this and now offer custom business insurance packages for small companies that need risk coverage. This also allows SMEs to save money by not having to pay for coverage they will never need.
The focus on risk has also evolved from what a company can clearly see as a risk, to now include ones that they may never see coming. Insurance companies play a key role here as well because their presence in markets around the world gives them a front line position to views any evolving risks.
They can then quickly provide insurance products that can cover companies. Now we have a greater understanding of risk and external factors, you can take steps to ensure that you will be protected, regardless of what happens to be thrown at you in the modern business environment.