Managing risk

The risk management process

Businesses face many risks, therefore risk management should be a central part of any business' strategic management.

Risk management helps you to identify and address the risks facing your business and in doing so increase the likelihood of successfully achieving your businesses objectives.

A risk management process involves:

• methodically identifying the risks surrounding your business activities
• assessing the likelihood of an event occurring
• understanding how to respond to these events
• putting systems in place to deal with the consequences
• monitoring the effectiveness of your risk management approaches and controls

As a result, the process of risk management:

• improves decision-making, planning and prioritisation
• helps you allocate capital and resources more efficiently
• allows you to anticipate what may go wrong, minimising the amount of fire-fighting you have to do or, in a worst-case scenario, preventing a disaster or serious financial loss
• significantly improves the probability that you will deliver your business plan on time and to budget

Risk management becomes even more important if your business decides to try something new, for example launch a new product or enter new markets. Competitors following you into these markets, or breakthroughs in technology which make your product redundant, are two risks you may want to consider in cases such as these.

For more information on good practice in risk management download a guide to risk management for SMEs from the Institute of Chartered Accountants in England and Wales (ICAEW) website (PDF, 93K) - Opens in a new window.

Your business may benefit from implementing a risk management standard, which could provide guidance on reducing the impact of everyday and extreme events. The British Standards Institution (BSI) has published British Standard BS 31100: 2008 Risk Management - Code of Practice, which sets out a detailed description of the risk management process and the framework within a business that is required to support the process. Find information on risk management standards on the BSI website - Opens in a new window.

Subjects covered in this guide

• Introduction
• The risk management process
• The types of risk your business faces
• Strategic and compliance risks
• Financial and operational risks
• How to evaluate risks
• Use preventative measures for business continuity
• How to manage risks
• Choose the right insurance to protect against losses
• Here's how risk assessment helped my business

Print options - What are my print options - Opens in a new window

• Add guide to my print portfolio (print later as PDF)

Email options - What are my email options - Opens in a new window

• Tell a friend about this page
• Send me an email alert when this guide changes