Maintaining a risk management team at your facility can make a major difference in the quality and stability of your operations. You can build a team and then task them with handling the following four risk-related issues.

IMAGE CREDIT: https://unsplash.com/photos/SYTO3xs06fU

Identifying Potential Problems

Assessing risks is close to impossible if you’re not working from a comprehensive list of potential scenarios. For example, your team can use a third party risk management software to send questionnaires to vendors and suppliers. You then compile the answers into actionable data about the risks to third-party services and your supply chain.

Similarly, you can look throughout your organization for potential risks. If certain processes depend solely on one supplier or a specific machine, for example, you can start exploring options. You can then extend the identification process to second- and third-order issues. Perhaps you’ll discover that the turnaround time on replacement parts for a key system is several months.

Risks exist in lots of places so your team can never be too thorough. You should think about customer data, trade secrets, nearby infrastructure, market risks, and many other potential issues. Your goal is to establish contingencies for every perceivable scenario.

Assessment

Once you know what the potential risks are, you need to assess their potential consequences. In the previous example, the availability of replacement parts was a problem. Your risk management team should be able to state the opportunity costs in terms of lost business if that machine goes down. Likewise, they should be able to outline the repair or replacement costs associated with getting the machine back online.

Assessments should also look at regulatory and liability exposure. If you depend on a vendor to handle merchant terminal processing for your online store, then you need to consider the risks associated with cybersecurity breaches and digital system failures. Especially if your company operates in a sector with strict privacy laws, such as healthcare, the third-party risk could be tremendous.

The assessment should also explore how diversified interests might actually mask risks. If a food processor has contracts with four suppliers, for example, what happens if all of those businesses are in the same drought-prone region? Your risk management team should always think about the maximally damaging scenario.

Mitigation Options

With an assessment in hand, you need to consider how to mitigate the identified risks. Mitigation options may range from buying insurance to building more resilient supply networks. Companies with overseas supply exposure may need to diversify the origins of their inputs to include suppliers from several countries. If you have legal exposure through third parties, your risk management team may need to conduct compliance audits. Whenever possible, you want to limit the ways a single event can implode your operations.

You may also need to make adjustments within your processes. Stockpiling inventory can allow you to ride out supply chain crises, for example. Firms that have digital risk exposure may need to adopt new software stacks to minimize the possibilities of compromised communications, security, and data.

Monitoring and Adjustment

Ongoing monitoring is just as important as the initial identification and assessment processes. You should use enterprise software tools to monitor how well at-risk processes are performing. If you notice that specific third parties are struggling to get materials to you on time, you might need to adjust to the situation.

Good monitoring tools will act as early-warning radars that will tip you off about inbound risks. The sooner you can see that something is changing, the sooner you can task people to address the situation.

You also should monitor for emerging risks. Questionnaires should go out to vendors annually. As circumstances change, you should adjust the questionnaires to account for emerging risks and de-emphasize mitigated issues.

Conclusion

Professionals prepare to confront risks before they appear. The goal of having a risk management team at a facility is to ensure that you have plans in place for the multitude of scenarios that can play out in your corner of a complex world.

By identifying risks before they appear, you can get a leg up on responding when events inevitably but randomly unfold. Your business will be more resilient, and that can make it more competitive in bad times, too.

Liked it? Take a second to support Geek Alabama on Patreon!

5 Product Trends Taking Over eCommerce Markets 5 Reasons Why A Website Is Important For Small Businesses Fun Ways To Promote Your Small Business