Business Advisory Blog Business management information from Robert Griffin.

August 24, 2010

Managing Risk

As I said in my blog Risky Business “Every business is at risk every day of having something happen that has a significant negative impact on that business.” So if that;s the case how do you go about dealing with it, i.e. minimizing the impact on your business?

National Association of Corporate Directors (NACD) established a Blue Ribbon Commission on Risk Governance to look into just that. Now most of what NACD does deals with large, mainly public companies, with boards of directors so their aim is towards that audience. However, that does not mean their findings and recommendations are not useful for smaller private companies as well and even at an operating level.

The statement by Admiral William J. Fallon (U.S. Navy, Retired), co-chair of that NACD commission stated that “Risk governance is about three things: understanding the limits of acceptable risk, providing confidence and guidance to management, and anticipating events to set yourself up for success.” It seems to me that any business at any size can think about those three things.

1. Every company, regardless of size, needs to establish the limits of their acceptable risk. But first you have to determine what and where those risks are. Financial always comes to mind but what about customers, vendors, regulatory, human capital, etc.

2. Providing confidence and guidance to management is as simple as having management involved in the risk management process. Whether you are the one and only manager or you have a sizable staff input and involvement of managers is critical.

3. Anticipating events to set yourself up for success is to me simply carrying out items 1& 2. Doing those things identifies what could happen that would be detrimental to your business thereby allowing you to plan a way to avoid those things and therefore succeed.

So what big public companies need to do, so do smaller companies, public or not, just do it differently while using less resources of course.

Robert Griffin

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