How Do You Keep Operational Risk To A Minimum?
14 April 2010
There are all sorts of risks associated with business. If you were to take the more commonly occurring and more potentially harmful risks and give them all a category, they would fall under operational risks. Operational risks in business are encompassing and include every risk stemming from a company's business functions. Obviously, it's essential to avoid these operational risks. However, there is no surefire way to completely eliminate them. The idea is simply to keep them to a minimum. Luckily, there are many ways to do that that won't really cost your business a lot of time or money. What it will take, however, is effort on your part to see that the need for risk awareness is ever present.
Start first with the common sense aspect. If you're running a smaller business, then there's no real playbook to speak of. What I mean by this is you're most likely not going to have a team of advisers and lawyers waiting on call. Since you're not a huge corporation, you're assuming all responsibility and thus must be schooled on the risks. Take legal risks for example, this risk definitely falls under the operational category. It's up to you to make sure you have any type of liability insurance you need for your business. If you're not sure exactly what you need, then you need to do a little bit of research and find out precisely how to protect yourself. If that last paragraph didn't make it clear, handling operational risks is more of a pre-emptive strike against things that could possibly happen. Use this same logic for risks of fraud. You don't necessarily have to have a
business partner or any employees to have this risk jump up and bite you, either. If you're in business, then you're always at risk of fraud. Someone can make a claim of false advertising, false billing, and a slue of other claims. You must work to make sure you're not running your business in any way that could be deemed fraudulent. Operational risk is a term with a variety of meanings. It can simply mean the risk of loss for a business brought on by inadequate process, employees or systems. Basically, to keep any of these risks at a minimum, it's important to make sure you're running a tight ship. Running a business is a very hands-on process, one that you should not take lightly. If you're planning on operating a successful business, even on your own, the best way to ensure that you're best handling every possible risk is to constantly study your business, your customer base, your
marketing strategy and every other aspect of your company. There are also companies out there that will assist you in assessing risk and help you to sure-up your business. This can be expensive, however, and it's really not required of anyone with a smaller business so long as you're willing to put in the work, tie up all loose ends and make sure you're operating up to par. The operational risks that will face you are numerous, so it's solely up to you to keep your business running cleanly and efficiently to avoid them as best you can.
