Using A Risk Management System To Solve Business Problems For SMEs

Risk management practices need not be restricted to large organisations. The principles and systems can equally be applied to small and medium sized businesses.

Business owners should ask whether their business:

• struggles to reach its potential

• continually fights fires

• doesn’t take advantage of opportunities

• incurs costs through bad decisions

• reacts to events in a haphazard manner

If any of these problems apply, then a risk management system is probably needed.

Risk management systems need not be expensive, and can be tailored to meet the needs and budgets of any organisation. In every instance, the benefits of a good risk management system is likely to outweigh the costs of implementation.

Setting up a risk management system has three broad stages:

Establishment – involves understanding the objectives and operating environment of the business.

Analysis – identifies and ranks risks and their characteristics.

Treatment – sets priorities and plans to mitigate the risks.

Communication and reporting processes which allow information to be shared are also essential if a risk management system is to be successful.

Aside from the obvious benefit of reducing the risks, other benefits include:

• Goals are achieved in a shorter time frame, and at a lower cost.

• Good governance is achieved by understanding and minimising the effects of the risks.

• Proactivity reduces the effects of risks, or prevents them before they occur.

• People are accountable for managing the risks in their area.

• Opportunities, a key component of a successful risk management process, can be better focussed on.

• As a management tool, it can be used to grow the business.

• Better decision-making is facilitated by focussing on the risks and opportunities of a decision.

• Resources are more efficiently allocated because:

  • Critical areas are prioritised

  • Wasted or over-committed resources are identified

  • Existing risk management efforts are better coordinated

• Organisations are better placed to manage the uncertainty associated with risks, because they understand them.

• More free time is available to pursue more worthy projects as less time is spent fire fighting.

Chris King is a partner with accountants and business and financial advisers HLB Mann Judd Brisbane. For further information please Phone: (07) 3001 8800 or visit the web site: www.hlb.com.au
First published: 15 June 2006.
Last updated: 15 June 2006.