Smart Finances: Educating Employees on Risk Management

Smart Finances: Educating Employees on Risk Management
  • Opening Intro -

    Identifying and preparing for risk is essential for building a successful company.

    But it’s no longer enough to leave it to a designated risk officer or committee.

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One of the best ways to ensure that your company is effective at managing risk is to see that employees follow your policies.

Training

All affected employees, whether it’s management, entire departments, or project teams must be made familiar with the factors necessary to reduce risk. This could be best practices in security, order fulfillment, business ethics, or safety measures. Whatever an employee could possibly do to minimize risks should be made clear to them both during new hire orientation and as ongoing training, including specifics for upcoming projects.

Data Analysis

Your management team also needs to know how to monitor, collect, and analyze both financial and performance data to properly assess and anticipate risks. Issues such as workplace accidents, absenteeism, miscommunication, and any number of activities can escalate into harmful trends.

Ongoing or undetected problems can put your company at risk of lawsuits, and failure to satisfy customers or maintain strong cash flows. Your team should be able to establish benchmarks and spot potential issues at an early stage. This helps to ensure that the solution is not more costly than the problem.

Budgeting

It’s important to prioritize risks based on their likelihood and the severity of damage they may lead to. Many types of risk can be covered by insurance policies, such as property or liability insurance. However, you still have to budget for payment of premiums. You will also have to set aside the emergency funds for risks that can’t be covered through insurance.

Borrowing is a possibility, but this requires maintaining a strong credit score. It’s important to minimize credit risks like non-paying clients or rising operating costs. Third parties can arm you with credit risk analysis case studies that help you make the right decisions.

Company Culture

Open communication between management and employees is necessary to prioritize risks and propose preventive measures. This could be a top-down approach from the CEO or CFO that filters down to department heads, budget meetings, or brain-storming sessions. Your company can also benefit from a bottom-up approach where vigilance and extra effort from your workforce identify the daily risks they encounter. To this end, it’s necessary that employees are engaged and motivated. While this may add to the overall price of risk management, it’s worth noting that highly motivated employees commit 41 percent fewer quality errors and exhibit 21 percent higher productivity.

For these reasons it’s crucial that employees become an integral part of your risk management strategy. They are your point of contact in all operations. Without their contribution, your level of risk increases.

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