Are Any of These 8 Myths About Risk Management Stopping You Managing Your Business, Successfully?

If you have a negative view of Risk Management, it is probably the result of one or more of a number of wrong beliefs. Some are quite understandable, but they are all wrong! Here are the eight most popular misconceptions and why they are wrong.

Risk Management:

1. is another name for Insurance. The world was full of risks from the start: insurance has been around for only a few hundred years. Not all risks are insurable, but they all need to be managed. It is better to prevent the fire, accident or other loss than to receive an insurance payment after the event.

2. is another name for Health & Safety. There are many kinds of risk: property, financial, reputational, environmental, physical, cyber, and business. Health & Safety deals with only one kind. An essential element in good risk management is the balancing of one risk with another, e.g. the risk of a car crash versus the risk of being robbed on the Underground.

3. is a fancy name for Common Sense. If only sense were so common! It is true that good managers have often managed risks successfully without using that term, but there is a danger of overlooking something potentially serious but not obvious. You also need to write down your informal assessment of risk for the benefit of others who may not have your “common” sense.

4. is bureaucratic and time-consuming. Only if you want it to be. Some people make every process bureaucratic and every task time-consuming. If you do everything else efficiently, you can do Risk Management efficiently. Keep it simple.

5. is too expensive. It depends on the risk and the way you decide to manage it. If you cannot find a satisfactory way of controlling a serious risk cheaply, you may have to go for an expensive solution. Compare that with what an accident etc. would cost. Take a balanced view of the options. Often, however, better Risk Management improves efficiency, effectiveness and profitability.

6. is someone else’s responsibility. It can be a good thing to take advice from someone inside or outside your organisation, to bring in an objective view, but the responsibility for managing risk must belong with the responsibility for managing the activity. So whatever is your level of seniority you should be responsible for those risks which you control. Most businesses have Finance Managers but all managers must be responsible for managing the costs of their departments.

7. is something you do to comply with someone else’s requirements. This is the saddest comment I have heard on this subject. Of course we all have to do whatever is needed to please senior management, auditors, funding bodies, or investors, but if that is your focus, you will be missing the opportunity to improve your performance and protect your business, yourself, and others from the risks we all live with.

8. is an attempt at making a risk-free world. Apart from being utterly unattainable, such a world would not be desirable. Risk Management is about balancing one risk with another and deciding which risks are acceptable and to what extent. In your business, only you can decide those things.

So forget the myths and think about the risks which could affect your business. Then think about ways to manage them – sensibly, realistically and profitably.

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