The term ‘business risk’ highlights the possibility of a danger to any company’s capability to attain its financial goals. In business, hazard means that a business’s or organisation’s plans may not turn out as decided, or there is a failure to meet targets or attain goals.
Many factors can create or combine to create business risks. Sometimes it’s a corporation’s top management that creates circumstances in which the business or organisation is exposed to a greater degree of risk. However, sometimes the cause of the risk is of an exterior nature.
Therefore, it is impossible for a company to shelter itself fully from hazards. But there are ways to lessen the overall risks related to operating a business. Many organisations achieve this by offering advanced training to their employees to excel in the workplace, while some adopt risk management approaches to do so.
Business risk is affected by several varied reasons or events:
- Customer requirements or preferences, demand, and sales capacity
- The general financial climate
- Government guidelines
When a company is exposed to a higher level of business risk, it may harm its competency to offer investors and stakeholders satisfactory returns. For example, the CEO of the company may make certain choices that affect its returns, or the business leader may not precisely anticipate certain actions in the future, causing the business to experience losses, or to fail.
A hazard a company or organisation might face can arise due to discrimination in the workplace, thus not treating everyone fairly at work, or contravention of other aspects of employment legislation. Corruption, dishonesty, and harassment at work can also cause business hazards if not undertaken.
Another significant hazard that businesses come across is the threat to their data. Therefore, an understanding of Data Protection Regulations and the responsibilities placed upon the employer and employees is essential.
Business-risk assessments help employers and risk managers to recognise potential threats, and their significance, and to determine timely solutions. Businesses of all sizes use risk assessments to lessen the business risk, produce disaster recovery strategies, and thus get assurance for what they cannot fully control.
The process of successfully carrying out a risk assessment involves:
What could harm the employees when doing their job?
This step consists of identifying which business or asset might be harmed or damaged by the risks, such as employees, clients, the company’s reputation, or the environment.
Determining how likely it is that damage will occur and suggesting changes to stop it.
Therefore, to run a business successfully, employers must have business risk assessment strategies in place.
A business risk assessment strategy ensures that employees, potential employees, and clients feel safe and comfortable, and that the organisation’s prospects are safeguarded as far as is possible.
Apart from assessing the risks, managing risks also plays a vital role in controlling workplace hazards. Adequate risk insurance is prevention. Averting risks from taking place in your business is best accomplished by offering employee training, and having systems for background checks, security checks, and equipment maintenance.
A staff member with supervisory authority should be selected to handle risk management. A risk manager should plan actions in case of an emergency, such as:
- Hazardous material incidents
Employees should know what to do, and where and how to leave the workplace, in the event of such situations. A plan for safety examination should be established and performed, including training and instruction of staff via workplace courses. It is very much in the interests of employers to offer workplace management courses to their employees.
As explained earlier, business risks can be of an internal nature (such as your strategy) or external (such as the global economy). Therefore, you should understand what type of business risk you are facing and how to deal with it.
The following are some of the main business risk types one should keep in mind.
Strategic risks can occur at any time. For example, a competitor might enter the market, resulting in a drop in your sales. To deal with such risks, employers need to implement a real-time feedback system that tells them what their customer wants exactly.
Racialism might seem like a community and a legislative matter but it is a business issue as well. Yes, undisguised racism happens in workplaces, but the problem goes deeper. Racism is conventional, which means companies might be discriminating on grounds of race, whether they are aware of it or not.
To cope with this issue, an employer needs to offer equality, diversity, and inclusion training in their workplaces, so that employees recognise the importance of respecting each other, irrespective of difference, so as to promote a fully appropriate working environment.
This type of business risk might range from credit card fraud, to your own organisation’s liabilities. Interest rate variations can also be a threat. Another monetary issue related to businesses is bribery and corruption, which exist in almost every part of the world, giving rise to a severe threat to an organisation’s integrity.
Anti-bribery and corruption training will be beneficial to, and may well be essential for, employees who might be exposed to such risks. It will teach them about the different forms of bribery, the warning signs, and help them understand how to prevent or avoid such acts.
An operational risk could be of an internal or external nature, or be a combination of such issues. Something unpredictable could occur that adversely affects the business, for example the breakdown, or theft, of key equipment.
Employers face an abundance of laws and regulations they have to comply with, such as data protection requirements and payment processing compliance, that could impact how you handle certain aspects of your operations, as could the introduction of new rules and regulations, or theft associated with the company’s data.
Therefore, proper training of employees on General Data Protection Regulations is essential. If your organisation does not comply with such GDPRs there will be a significant risk to your business, and the possibility of hefty fines, loss of business, and legal claims.
Statistics show that in the UK business size largely determines the degree of exposure to cybersecurity risks, the larger the organisation, the greater the likelihood of being at risk (larger firms being subject to 77% of adverse cybersecurity events). According to the figures, 28% of organisations encounter cybersecurity risks affecting continuity plans, internal audits, or risk registers.
Workplace equality requirements are also a source of risk for businesses. According to the Health and Safety Equality Data Report, around 32.9 million people were working in Britain in 2018. It also states that ethnic minority businesses contribute around 25 to 32 billion pounds to the UK economy each year.
As mentioned above, bribery and corruption can be a threat that companies face. In 2018, nearly a quarter of UK companies met with some form of bribery and corruption. Globally 1 in 4 people have to pay a bribe. Bribery and corruption costs organisations 2.7 trillion pounds per year.
In addition to racism, corruption, and bribery, data breaches pose severe risks to businesses. Data breaches are widespread. An unauthorised loss of data hit roughly one in four companies in 2017. It is a vast and growing problem for all kinds of organisations and businesses.
Effective communication also plays a significant role in the success of a business. Everyone communicates every day, but the problem that occurs here is not conveying the message correctly. According to a study, words only make up 7% of overall communication. Tone, pitch, and body language are the main factors in making your communication effective. If individuals lack these skills, then the business will be adversely affected.
Bullying and harassment in the workplace is a risk associated with many businesses and should never be ignored. According to a study, the ratio of workers who have experienced workplace bullying is relatively consistent across age groups and gender.
It is the legal responsibility of an employer to provide a healthy, secure, and safe environment for their employees and other individuals who might be connected to the business. Employers must do whatever is sensibly workable to attain this so as to promote a healthy workspace.
Managers must give their workforces information about the risks at work and how to guard oneself by offering training to deal with dangers.
Employers also must understand the basics of business to promote health and safety and to assess risks in the workplace. Managers should regularly carry out risk evaluations that report all identifiable risks that might cause damage in the workplace.
To promote a risk-free environment, both employers and employees must follow the necessary steps. Both parties have some legal duties for this purpose.
- Under Health and Safety at Work etc Act 1974, employers must take responsibility for the health and safety of their employees “as far as reasonably practicable”. As such, management must make and demonstrate efforts to identify, assess and manage all risks in the workplace. They must also provide the necessary equipment and training to conduct work in a safe manner.
- Employers must consult workforces on health and safety matters. Discussions might be formal or of an informal nature, or conducted through a safety representative chosen by employees or by a trade union.
- Employees have a legal duty to not knowingly put themselves, or anyone else at risk. They are expected to follow the training and advice they have been given, in respect to working safely.
Employees have a responsibility to co-operate with supervisors in documenting the above duties for compliance evidence purposes.
By the business acquiescing fully with the rules, guidelines, and industry values concerning the safety and well-being of employees and clients, and the protection and maintenance of amenities. The risk management policy and arrangements must ensure that employee safety arrangements are in place all the time they are at work.
Business owners and employers are lawfully responsible for health and safety and risk management. This means that employees or anybody who visits their buildings must not be endangered by anything that might cause harm or damage. The owners and risk managers are required to control/mitigate any risks that could arise in the workplace.
Workplace risks can be controlled and managed by adopting less risky options, preventing exposure or access to a hazard, providing welfare facilities such as first aid, and offering employees training on how to protect themselves from workplace hazards, risks, or accidents.