Businesses operate in highly uncertain environments. Uncertainty brings a lot of risks to your company. This is why risk management is useful for every company.

Every team member plays a vital role in risk management. Taking a safe route during a race is essential to winning it. However, a team must also risk when it needs to produce results. Leaders must teach their members how to safely manage risks while achieving their goals. Even the best teams have trouble with this and ultimately fail to meet their goals.

Most competitions have strict rules regarding risk management. Teams must choose an easily traveled path to avoid accidents during races. They also need to avoid dangers such as landslides and construction sites during their journeys. In addition, competitions have safety rules that each member must follow. Failure to follow these rules can result in disqualification and ultimately a loss of points for the team. Through careful consideration of risks, teams manage their performance well and win competitions.

Each member of the team should understand their role in risk management and act accordingly. The leader sets the tone for the rest of the team by demonstrating safe risk-taking techniques. He understands how to prevent accidents while still achieving his goals- which is vital for a good risk manager. Members who understand their role as part of the team will act accordingly and help the leader manage risks successfully. The plan will succeed if everyone plays their part.

A good team risk management plan involves rewards for safe actions and disciplinary action for risky behaviour. Disqualification for breaking rules helps promote safe action; it also prevents members from gaining points that they don’t deserve. On the other hand, positive reinforcement helps train members not to take risks without achieving results. This ensures that risky actions result in appropriate outcomes. Having both types of strategies in place makes managing performance easy for any leader.

Taking a safe route during competition is essential for successful risk management. However, teams must also manage risks by choosing appropriate paths and implementing safety strategies. Ultimately, a team’s success depends on good risk management; without it, they will never achieve their goals.

Risk management strategies/risk treatment options.

Risk acceptance:

“A risk is accepted with no action taken to mitigate it.” This approach will not reduce the impact of a risk or prevent it from happening. It is best to accept a risk when the risk has a low chance of occurring or has a minimal impact if it ends up happening. Why would you spend 500,000€ to prevent a 50,000€ risk? Sometimes it makes more sense to take the risk than mitigate the cost of the risk itself.

Risk transference:

“A risk is transferred via a contract to an external party who will assume the risk on an organization’s behalf.” The risk does not disappear, but the responsibility of it is shifted from one organization to another. Travel insurances are a great example of this type of risk transferring. You transfer the financial problems of a possible suitcase loss from your company to the insurance company. This works with everything that you may outsource to your company. The possible problems still exist but you are not responsible for them.

Risk avoidance:

“A risk is eliminated by not taking action that would mean the risk could occur.” This example is the simplest one. You aim to completely eliminate the possibility of a risk occurring. If you avoid every risk, you may miss out on positive opportunities that could be very beneficial in the long run. That is why it is very important to deeply analyze risks and make the most thought-after decision you can.

Risk reduction:

“A risk becomes less severe through actions taken to prevent or minimize its impact.” In this one, you lower the risks by making measurements and actions that lower the probability of risks and make them more manageable. Commonly known as lowering risks. This is the most used method as it ensures the best results with the lowest levels of risk.

Risk management is important for us all entrepreneurs. We live in a world where there are risks everywhere. And the purpose of an entrepreneur is to take risks to achieve something never done before. When exploring something completely new which has not been documented beforehand for you to check out for reference is the problem in risk management for entrepreneurs. This is why we should have a general understanding of how risk management works so we can implement the right type of risk management to our specific situation. It is good to take risks, but some risks are too big to be taken at certain times and there is where risk management comes in clutch.

Sources:

Risk management guide: What You Need To Know About Business Risks, Entrepreneurship/in/a/box, Dragan Sutevski, Read 16.10.2022.

What is a risk management strategy?, Ideagen, Abie Glossop, 23.04.2021.