How Do Policies and Procedures Help Us Manage Risk?

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If you’re naturally risk averse, you probably don’t think this is the best time to consider starting a business. The normal risks you’ll face seem amplified by the currently unsteady economy. On the other hand, if you’re a risk taker, you might think this is a great time to get going, taking advantage of the fact that everyone else is so reluctant to commit themselves.

There are many ways we can deal with business risk. We’re all familiar with the four classical risk management categories:

• Avoidance;
• Mitigation, or reduction;
• Transference; and
• Acceptance.

For example, I don’t gamble often and when I do, I tend to have a minuscule stake in the outcome. I avoid the risk, for the most part. On the rare occasion when I “throw” money at one of the multi-state lotteries, I throw away a dollar or two. I’m mitigating my risk by betting a couple of bucks (at most), because I accept the truism that “the house always wins”.

Here’s another example — insurance for our businesses, as well as our health, homes, and so on. We’re well aware of the fact that we can’t possibly prevent every natural disaster or workplace accident, so we pay insurance premiums to transfer a portion of the risk to the insuror.

Still another example: purchasing and using safety equipment, combined with regular safety training, will significantly mitigate (or reduce) some of the risk of running your business.

Another way to reduce risk? Our business policies and procedures, collectively speaking, are a highly effective risk management tool. Clear, well-written policies and procedures, combined with effective employee training programs, have proven to be among the most effective risk management solutions you can implement.

Of course, if you need help developing effective policies and procedures, you can count on Bizmanualz to deliver. Check out our extensive library of policies and procedures at http://www.bizmanualz.com and let us know how we can be of service.

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So, what are the two or three greatest risks your business is facing today?