Smaller Companies Must Embrace Risk Management

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SMEs do not have the same regulatory pressures that can lead larger companies to measure and mitigate their risks, but they also have fewer buffer resources to resist unexpected shocks. They are one large potential incident away from bankruptcy. That’s why SMEs can benefit from taking three actions: designing controls proportionate to the risks at stake, analyzing the lessons from success (not only from failures), and using risk management to boost and protect business performance.

Conversely, extreme risks deserve greater care: a phishing link starting a cyber-attack, the loss of key intellectual property in an innovative start-up, a bacterial infection in the water supply of a care home. Neglecting real dangers costs millions, heartaches, and lives — and that’s when we regret not being more vigilant, more careful, moreYet, organizations often miscalculate risks. Smaller incidents are the most frequent; they raise attention but do not matter.

For example, a senior risk officer of a clearing house in London stormed out of a workshop when some of the causes of the loss discussed were identified as a consequence of his management style. He vetoed further exercises and was let go six months later, for other reasons. The firm in question has now closed.creates more enthusiasm for analysis than “” Dissecting past achievements is encouraging and insightful.

Praising good risk management practices reinforces winning behaviors and avoids undue criticism, and positive risk managers become mentors, not doomsayers. Welcome and accepted, risk management becomes an ingredient of achievement.Managing risks is inseparable from managing performance. Positive risk management aims to capture the upside of uncertainty, and to prevent the downside as much as possible.

Particularly for smaller firms, growth comes with risks, and fast-growing start-ups generate operational risks faster than revenues, as complexity increases more rapidly than size. Only those with sound risk management systems will become the Google, Amazon, Disney, or McDonald’s of tomorrow.expect

 

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