By Dana P Skopal, PhD

In business we manage an array of processes to govern and create wealth by increasing earnings. Good management and good governance require appropriate risk management and clear communication.

Has your business defined the term ‘risk management’? Or do you adopt a definition from the International Standards?

First, what does risk mean to you? As we can have financial risk, credit risk, corruption risk, and even have a health risk, the possibility exists that each person in your organisation in fact creates their own interpretation of each ‘risk’. Do you have clear procedures in place to ensure your staff understand your business level of risk?

Second, management itself is a complex process. A clear systematic management style is necessary if you want to adequately manage the risks associated with your business. Managing the risks involves many steps, all of which should be well documented.

For each business activity a manger needs to identify the risks, evaluate the risks and ensure that staff follow correct procedures to minimise any risks. A manager not only needs to monitor the levels of risk, they need to communicate the correct procedures and practices to the staff. For example, under the privacy laws a business has to keep personal data secure and then safely delete it when no longer needed. Communicating the correct steps for dealing with the data is paramount, and the systems for storing and deleting data also need to be regularly reviewed.

The word ‘risk’ is an abstract noun, as are most of the descriptions to do with risk in the above paragraphs – eg procedures, standards, management, process, systems. Communicating with abstract nouns can lead to misunderstandings unless the terms are clearly described. Stop and check that your team at work agrees on the processes and standards – consider how you define these key concepts.

Think about risk management as being able to do business, complying with the law and being prepared for any unforeseen events. Just as Lord Robert Baden-Powell decreed the Scout motto: be prepared.

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