20 Sep Four benefits of risk management important for your business
Risk management is a process dedicated to identifying risks within a business and developing procedures to mitigate or eliminate potential issues. An effective system helps maintain the safety of staff, whilst protecting business resources.
Risk management is an essential part of effective business planning and organisations are expected to provide a safe environment for workers. Work Health and Safety (WHS) regulations often play a instrumental part in risk management. WHS governs the regulations behind what’s an acceptable practice and what is not.
A specific and detailed risk management system is a vital investment for all businesses. We’re going to cover four reasons about why risk management is so important:
- Risk assessments save your business money
- Risk assessments reduce the chance of injury in the workplace
- A risk management plan protects a company’s resources
- A risk management plan improves a company’s brand image
Businesses invest in risk management systems to mitigate the risk of spending thousands of dollars in financial, legal and internal costs. Let’s look at how businesses use risk assessments to save money each year.
Risk assessments save your business money
Effective risk management plans look beyond improving one area of the workplace. They encompass all aspects of an organisation including; safety, financial, business and environmental risk management. Here are the main cost benefits of risk assessments:
#1. Risk assessments reduce the likelihood of a workplace accident – Safety audits and inspections help businesses identify areas to improve work processes, signage, or training.
#2. Risk assessments reduce and prevent fines, lawsuits and penalties from non compliance issues – Every organisation must comply by their State’s WHS legislation.
#3. Risk assessments show employees the business cares about their safety – Your staff are a valuable business resource. Provide them with more knowledge and responsibility to improving your safety management system for higher morale by showing you trust them.
Risk assessments reduce the chance of injury or mishandling in the workplace
Every workplace has hazards. As an employer or business owner, it’s your responsibility to impose risk assessments to protect employees against WHS hazards.
According to Safe Work Australia, there are Four Steps in the risk management process:
Step One: Identify risks
Step Two: Assess risks
Step Three: Control risks
Step Four: Review control measures
Source: Safe Work Australia
Understanding the steps can reduce the number of injuries, hazards and risks in the workplace.
By carrying out the Step 1 of the process, you assess the risks and map out situations that could potentially cause harm to people or resources.
During the Step 2, conduct a risk assessment based on factors such as:
- The severity of the risk
- Whether any existing control measures are effective
- Actions needed to be taken to mitigate the risk
- How urgently the action needs to be taken care of
The Step 3 involves putting controls in place to prevent the risks from happening and what to do if they do occur.
Step 4 comprises of reviewing the process to identify any other opportunities or risks that may have been missed.
By carrying out the process, you have the ability to mitigate or eliminate risks from your workplace before they even occur. The first risk assessment you carry out will be the most resource intensive, since you need to do a review of your entire work system and processes. Year-on-year, the process becomes more efficient and processes will continue to be refined and improved.
Overall, risk assessments take more time, energy and resources when first implemented. In the long-run they reduce the number of injuries, hazards and risks in the workplace.
Why is it important to have a risk assessment?
A risk management plan protects a company’s resources
Risk management plans don’t simply identify risks, they make it possible for organisations to prioritise them. As previously discussed, Step Two of the risk management process involves assessing the risks (see diagram above). This is often done on a likelihood/impact matrix to help identify which resources are a priority and how quickly the risks need to be responded to.
Here’s an example of a risk matrix:
Your business has a valuable company resource; if an incident occurred in the organisation that impacted this resource, it may have a detrimental impact on the overall business processes and performance. Let’s assume the probability of the risk occurring is moderate. By looking at the matrix we can see this is a ‘high’ risk, priority area. A business would apply the matrix to all risk identified in Step One.
Identifying a course of action for each risk saves the company time, money, and physical resources.
A risk management plan improves a company’s brand image
Workplace incidents can lead to major PR issues such as negative publicity and a distorted brand image. For example, AGL Energy faced a coal seam gas protest. In 2013, people protested about the hydraulic fracking process AGL participated in. As a result, the company put on hold the development of 66 coal seam gas wells in Western Sydney.
When a business creates a risk management plan, it sends a positive message to stakeholders and the community. Employees feel confident they are working for a safe and responsible company and customers have assurance they are conducting business with a professional and proactive organisation.
Overall, risk management plans show that a company is reputable and holds itself to a high standard.
Create a risk management system for your business
Risk management plans are an effective process that will save you money, reduce the risk of a workplace injury, protect your business resources and brand image.
BusinessBasics can take the pressure of any business who is having risk management issues — whether you need a consultant to assist you with your system, training or an audit of your safety management system.
We provide the following WHS and Environmental Risk Management Plans:
- Full safety management
- WHS and Environmental Risk Management Plans
- Safety and environmental audits
- Review of your supplier and subcontractor management plans
Get in touch with BusinessBasics if your management team would like to discuss other ways to create a more productive and efficient workplace.