How to Identify High Business Risks at the Workplace?
Risk management at the workplace is a daily challenge for managers working in any organization. Risks can be serious like potential fire in your plant/factory and embezzlement by senior management staff of the company or minor like employees using company time to conduct their own personal matters. In this article, we will discuss on how to identify high business risks at the workplace that we as managers, need to be mindful of.
To manage risks, we must first identify the risks that can potentially happen at the workplace. Risks are basically some events that may occur in the future and cause negative business impacts to the organization. To identify risks particularly those with high negative impacts to the company, we utilize the knowledge and experience of our experienced employees who operate the business processes, plant/factory equipments or units. This can be effectively carried out through structured brainstorming or facilitation. The facilitator given the responsibility in carrying out this assignment is someone who should be competent in the facilitation process. In addition, he/she must have the ability to manage the participants in the brainstorming session, especially the participants who are senior management staff.
I remembered an occasion when I was given the assignment to facilitate a group discussion which was attended by a Chief Executive Officer and several Senior General Managers. The Chief Executive Officer did not want to participate at the initial stage of the group discussion. I had a feeling that he was trying to evaluate whether I knew what I was doing. To overcome his resistance, I had to explain patiently to him on the process during the course of obtaining inputs from the other members of the group. As soon as he was convinced that the process was working and he was not wasting his time, I could not keep up with him as he was providing some excellent ideas at a very fast pace.
In a typical brainstorming session, the group can easily identify many risks that can happen in the organization. It will be quite impossible to manage the hundreds of business risks identified. Consequently, we need to prioritize the business risks identified. Prioritization involves managing business risks which have High Seriousness when they happen. What are these risks? We can consider risks with High Seriousness if the risks have negative implications on plant production, Health Safety & Environment, compliance to laws & regulations and the company image.
The other criterion in risk prioritization is to identify the likelihood or probability of the business risks happening. Will the business risks happen? Are existing preventive plans put in place by the organization, sufficient and effective? A good example would be business risk of “Late Delivery of a critical equipment” required for a new plant. If this critical equipment is delivered late, it will have serious consequences in affecting the completion of the new plant, thus impacting the planned production resulting in business loss. One of the preventive actions of minimizing the likelihood of this risk happening which has been adopted by my company, is to have a Liquidated and Ascertained Damages (LAD) clause in the contract with the equipment supplier.
The objective assessment of the risks identified, the seriousness and the likelihood of the risks happening, can then be captured in a Risk Map. The Risk Map is then used as the main reference for managing high business risks in the organization.