How Businesses Benefit from a Risk Assessment
Jun 14, 2023
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Are you aware of all the potential risks facing your business? There are always new risks to discover, but if you’re regularly assessing risk, you’re ahead of the game.Risk assessments are crucial to every type of business and when executed regularly, can save businesses from dealing with the financial, operational, and strategic burdens that come alongside unexpected risks. While it may seem daunting at first, here are 6 reasons to implement consistent risk assessments within your organization.
- There are tools that make it easy
You don’t need to use manual methods for risk assessment. Thankfully, there are many tools that make it easy. For example, Workiva offers templates for creating a matrix for risk assessment, which allows risk professionals to visualize priorities and estimate the probability of each risk happening along with the severity of the potential impact.
A matrix helps you accomplish three main goals:
- Measuring the size and scope of risk
- Determining if you have the resources to mitigate a given risk
- Triage and prioritize all risks in a user-friendly manner
While you can certainly create your own matrix, it’s better to use a template if you aren’t familiar with risk assessments.
- Risk assessments save money
A risk assessment can lower your expenses by reducing the amount of money you pay out in the form of sick pay and compensation for injuries. The fewer injuries that occur, the less time employees will have to take off, and you won’t need to hire more people to cover while they heal. Less time spent training new hires equals more money saved.
In addition to identifying and mitigating employee-related risks, a risk assessment can also uncover the potential for devastating financial harm to your business, such as legal expenses and steep regulatory fines that can amount to millions of dollars.
For instance, high data breach and GDPR fines are becoming more commonplace. Regulatory fines are designed to discourage businesses from ignoring their duty to protect sensitive information, but many organizations have been slow to comply.
Since data breaches are impossible to prevent 100% of the time, compliance is the only way to avoid fines. For example, a data breach usually doesn’t have to be reported if the stolen data was encrypted. In this case, failing to prevent a data breach won’t cost you tens of thousands (or millions) of dollars.
It makes sense to pursue every avenue with the potential for cost savings, and risk assessment will help you achieve this. In the long-term, an assessment will provide you with justification for expanding company-wide changes to policies or programs that lower risk.
- Not all risks can be avoided
Unfortunately, you can’t avoid all risks, but you can be prepared to handle them. A risk assessment will help you spot internal and external risks that can’t be mitigated or avoided. When these risks are identified, you can analyze them to create a game plan to react, should the risk actually occur. Some risks are easier to plan for than others—making .
- Less legal liability
If you don’t manage risk properly, your organization is prone to lawsuits. Aside from regulatory agencies imposing huge fines after a data breach, affected parties might file a lawsuit against you. Hiring an attorney and going to trial is extremely expensive, so it’s best to do everything possible to avoid legal problems.
Getting caught up in a lawsuit will quickly snowball your expenses, and if you lose, you’ll probably have to pay for the other party’s attorney fees. Having a strong risk management strategy is the best way to avoid this costly process of litigation.
- Happier customers
Sometimes potential risks pose more of a threat to your customers, like a change in price or quality from manufacturers you buy from. Other risks that can impact customers include downtime and cyberattacks. If your customers can’t use your products or services because your network or servers are down, they’re going to be upset and they might take their business elsewhere.
- Maintain your reputation
Risk management will support your business in many ways, but don’t underestimate how it will help you maintain your brand reputation. Companies that ignore risk and don’t take it seriously often end up involved in some kind of legal trouble. We’ve already discussed the expenses associated with litigation, but you also need to be concerned with reputational damage.
If you ignore or don’t identify risks that end up hurting your customers or making you look bad, you’ll lose public trust and your reputation might take a dive.
Get started with risk assessment today
Whether you’re new to risk management or just need to step up your game, start prioritizing your assessments. Give your managers the tools and data they need to make strategic decisions that avoid or mitigate as much risk as possible.
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