What is risk management? Why do professionals need to know about risk management? These are great questions to ask as a professional – whether you’re a consultant, a lawyer, a financial advisor, etc. Risk management will look different for every profession and every industry, but this risk management 101 provides tips for professionals all across the board.
It is critical to manage your risk as a working professional, not just as a business owner. Professionals face a different level of risk than your average worker does and, without properly addressing the issue or taking the necessary steps to mitigating your risk, your business may be severely impacted by a loss which could threaten to put you out of work for good.
Professional liability insurance is just one piece of the puzzle. Here’s the rest:
First of all, what is risk management?
Risk management is the practice of evaluating risks which could potentially harm your business’ operations – as well as its profitability – and taking the necessary action to mitigate the devastation of these risks or avoiding them altogether.
Risk management can look like:
- Mitigation – When you avidly reduce the impact of the potential risk
- Acceptance – Accepting that the risk may occur and creating an emergency preparedness response for if it does happen
- Avoidance – Taking away the risk altogether by avoiding taking on certain clients/working in a certain location/etc.
- Transference – Transferring all or a portion of the risk to a third-party, like through the purchase of insurance.
Risk management may take the form of the following steps:
- Acknowledging or identifying a risk that exists
- Determining the severity that the risk could cause to your business
- Identifying the source of the risk
- Navigating a process to mitigate or avoid the risk
- Navigating a process to recover from the risk.
Not every risk can be mitigated, avoided, or even managed. Some risks may simply need to be accepted (which is, in fact, a part of the risk management process!) As such, it is imperative that you focus only on the risks that are the most impactful to your business.
How does risk management help my business?
As a hard-working professional, you love what you do. You excel at what you do. You want to better your business, and risk management is one of many ways to do just that. Here are just a few of the ways that risk management can help better your business:
- Allows your business to be adaptable to change
- Boosts your teams’ communication skills
- Hels aid in project/contract negotiations
- Allows you to meet deadlines with success
- Keeps long-term costs affordable
- Allows your business to operate smoothly without a hitch
There are plenty more benefits than just those that we have listed here. Working with your team is imperative to acknowledging, weighing, and managing your risk. It just depends on your company’s individual risk and how seriously you take the process of risk management.
Not all risks can be mitigated
Part of risk management is accepting that some things may just happen, no matter the precautions we take and no matter the measures we instill to avoid them. Planning for risks can be a difficult endeavour, but there are some risks that we may simply have to accept. Part of our risk management plan can then be a “risk response plan,” for how we get back to normal following an emergency or incident.
For any business, the following scenarios can be significantly impactful:
- Cyberattack/data breach
- Medical emergencies
- Storm damage
- Fire damage
For your emergency response plan, you should consider orienting your team members on how best to handle the threat of a natural disaster. Include an evacuation plan, a muster point, and give each employee corresponding roles for if an emergency does occur.
Technology and data can be vulnerable spots when it comes to risk management as cyber-attacks become an ever-increasing issue for Canadian businesses. You need to be aware of these risks and how to handle your business accordingly if something does occur (such as a breach.)
Professional liability insurance may not be able to prevent a risk from occurring, but it can be a huge aid if something does happen. Professional liability insurance is designed for businesses and individuals of a professional nature and can cover you for legal defense costs if a client should ever sue for alleged, perceived, or actual negligence resulting in their financial loss.