There are four ways of dealing with, or managing, each risk that you have identified. You can:
- accept it
- transfer it
- reduce it
- eliminate it
Transfer the risk
You might decide to transfer the risk, which is typically done with insurance. This is best for risks that are unlikely to occur but would have a big financial impact. By taking insurance, the insurer will bear the costs of the risk occurring.
Reduce the risk
You can take actions that will reduce like likelihood of a risk occurring or reduce the impact. For example, you could introduce new safety measures.
Eliminate the risk
If the probability and impact of a risk are too high, it is best to remove the risk completely. This might involve changing the way you produce your product or deciding to avoid certain activities.
When you have evaluated and agreed on the actions and procedures to reduce the risk, these measures need to be put in place.
Risk management is not a one-off exercise. Continuous monitoring and reviewing are crucial for the success of your risk management approach. Such monitoring ensures that risks have been correctly identified and assessed and the right controls put in place. It is also a way to learn from experience and make improvements.
All of this can be formalised in a risk management policy, setting out your business' approach to risk and risk management. Risk management will be even more effective if you clearly assign responsibility for it to chosen employees. It is also a good idea to get buy-in to risk management at the board level.
Good risk management can improve the quality and returns of your business.