Operational risk management is imperative. It can make or break the success of your business. If you don’t have an operational risk management strategy in place, you should make it a priority going into 2020.
What is Operational Risk?
These are the risks you face by doing business. If this sounds broad, it’s because it is. Your operational risk is as unique as your business. Think of it like this, who do you serve? How do you help them? What could go wrong during this process?
The answer to the last question is your operational risk. For example, a childcare company’s operational risk is around the children in their care and everything that could go wrong from a child tripping over a toy to a major medical emergency.
Risk management strategies for the childcare company could include processes that encourage children to pick up toys, and having all staff trained in First aid and CPR. This example is primitive at best, but hopefully it gets the wheels turning about the operational risk in your own business.
How Should You Identify Your Operational Risk?
Start by looking at areas where things have gone wrong in the past. What happened? Why did it happen? How could you prevent it from happening again? This is the low hanging fruit of your operational risk.
Once you identify your largest issues and develop processes and procedures to keep things running smoothly, catching problems before they arise will save you a ton of headaches. Carefully look at every aspect of your business, one of our risk management team members would be happy to do this with you if you need an outside perspective.
Imagine ways your processes could go sideways or a product could fail. Think of what could happen in a case of employee negligence or mal intent. Don’t just assume everything is fine because it’s going well now. Think of the worst-case scenario from every angle and develop procedures to prevent that scenario from occurring.
How Should You Manage Operational Risk?
Operational risk is best managed from multiple angles.
Training – Make sure your employees have all the information and skills they need to do their jobs correctly. The more continuing education and safety training you provide, the better.
Procedures and Processes – Making sure you have procedures and processes in place that allow you to track actions, monitor employees, and create repetitive systems that work. When employees start operating without thought, they can get into hot water. Giving them procedures to follow ensures this does not happen.
Basic Safety and Maintenance – Look around your office or storefront. Is the area generally safe? Is the kitchen clean? Are you disinfecting areas or tools that could become a problem if you don’t? A basic maintenance plan that is created with safety in mind keeps problems from copping up in your physical space.
Awareness – Don’t bury your head in the sand when it comes to the operational aspects of your business. With each new or changed operation or service, a new risk management plan must be developed. Keeping up on this prevents problems from sneaking up on you.
Insurance – We’ve said it before, and we’ll say it again. Insurance is the last line of defense when it comes to a substantial risk management strategy, but it’s essential to have, and your insurance needs will be unique just like your business.
Need help developing an operational risk management strategy for your business? Give us a call. Our risk management team is always happy to help.