Risk management should be considered from three perspectives:
- why would a small business want to implement risk management?
- why should a small business implement risk management?
- why must a small business implement risk management?
The small business can expect many benefits from applying risk management in a structured and systematic way, including:
- improved communication between staff and with external stakeholders
- improved understanding of the impacts that management practices have on a business
- improved relationships with clients, employees, suppliers and contractors
- enhanced business planning and achievement of objectives and goals
- reduced exposure to litigation.
Reasons why a business owner should apply risk management include:
- increased transparency in financial management
- enhanced staff confidence in a secure and safe work environment
- enhanced client confidence in the quality and integrity of products/services
- protection of assets and longer-term viability of the business.
There are many legislative and regulatory requirements relating to risk management and these include:
Risk management can assist in strategic planning by mitigating the weaknesses and threats to achieving the objectives of the business.
Risk management may also identify where opportunities exist and how to capitalise on them to help the business grow and develop.