Effective risk management goes beyond just having adequate insurance policies in place and ensuring your company doesn’t engage in practices that may get you sued.
Risk management is also a core management discipline that comes into play every time you make a decision that affects the business. It means preparing your business for weathering all kinds of literal and figurative storms, ensuring the strategic plan of your business can be implemented, while also ensuring the smooth running of the company.
So how can you do this? Mainly through following the main characteristics of good governance . This doesn’t necessarily mean always making the right or ‘correct’ decisions, but instead it’s about using the best possible process when deciding upon and implementing them.
When making decisions that would be considered to hold ‘risk’, there are some key questions to ask yourself:
Can you be held accountable for this decision?
Essentially, are you able to explain and be answerable for the consequences of your decision if required?
Is it transparent?
Will people be able to easily understand and follow the decision made and the process in which you arrived at it? Will they have access to the information and advice that went into this decision?
Does it follow the rule of law?
This means you have remained within the boundaries of all relevant legislation and common law and cannot be prosecuted.
Is it responsive?
Does the decision serve everyone’s needs while also balancing any competing interests? And has it been completed in a timely and appropriate way?
Is it inclusive?
Does the decision take into account everyone’s needs? Have all members of your company been heard in the decision-making process and had the opportunity to put their thoughts forward?
Is it effective and efficient?
Does it use people’s time and resources appropriately? Does it allow everyone who will be affected or is interested to participate in the process of making that decision?
When managing risks for your business, ensuring that you have followed good governance in all areas will help to protect your decision and ensure that, should it falter, you have plans and processes in place to fall back on. It’s like creating a safety net to catch you should you fall. There will be more people responsible for the conclusions drawn than just yourself.
They will know how a decision has come about, why it has been made and upon what information it was established. They will likely have given their own input to that decision and will have also been confident in the knowledge that it was made without breaking any laws.
Every decision you make in business holds a level of risk – it requires you to be accountable!
Good governance leads to better decisions being made with reduced risk, confidence among the business, and supports ethical and legal behaviour too.
The chances of the decision having negative repercussions will be far less so than if it had been made without abiding by good governance – one that would certainly not have been a risk well managed.