Risk Management Basics
If you’re just starting with your small business, you may be asking yourself, “What is risk management?” In simple terms, risk management is how businesses identify and prepare for specific risk factors that a company might face. Having a plan for when things go wrong can be the building block needed to prevent a business from going under, so any business, from a global corporation to family-owned companies, must have risk management plans.
In Human Resources, risk management primarily supports workers’ compensation by reducing the possibility of employee-related injuries. Taking care of your employees and your business is one of the safest ways to support the longevity of your business. Since risk management is often less affordable for small businesses, you may benefit from purchasing it through a professional employer organization (PEO) that has access to the same plans and deals large corporations do.
Where Do I Start?
First of all, you must accept that you will, most likely, not be a perfect business owner. You are competent and knowledgeable, but mistakes happen to everyone. Opening a business in and of itself is a gamble, so you’ll likely have already accepted this fact. You know your industry well, so you already have an idea of what can go wrong. Forming a risk management plan will help you gain confidence as a business owner since not only will you have a plan for your goals, you have backup plans in case those goals get threatened.
Risk management can be a complex process to tackle on your own. There is an intimidating learning curve to the process, and many professionals pursue whole degrees in risk management itself as a discipline. If you want to focus on running your business, you may benefit from outsourcing risk management to a PEO. In essence, you would be hiring another organization to tackle the complex aspects of risk management assessment and create a plan customized to your business’s needs.
Why Do I Need a PEO?
While you may understand your business like the back of your hand, you may not be as familiar with the laws and regulations that businesses must follow. Instead of spending grueling hours of research to make sure your business is protected, PEOs take on that burden so you can focus on your customers and growing your business.
Some small business CEOs are hesitant to ask for help with their business practices, but one of the best qualities of a successful leader is to know when to ask for help. Not only will a PEO lift a large amount of responsibility and stress from your shoulders, but it will also likely give your business a better chance at succeeding. Organizations that utilize a PEO usually see positive ROI within the first year, achieve faster growth, keep employees longer, and are 50% less likely to go out of business. There are specialized PEOs for every industry, from retail to medical. Thousands of businesses use PEO services. Rather than controlling the company, PEOs give business owners guidance to use their time more wisely.
Small businesses can also get a leg up on the competition since utilizing PEOs can grant them access to resources that fund 401(k) plans, health, dental, life, and other insurance plans. This access will make you more competitive as a business as businesses that offer benefits are more appealing to applicants than those without. In return, you could likely attract and hold onto better talent for longer and further grow your business as a result.
It is more of a risk to go without a PEO. At Canal HR, we have the most up-to-date knowledge of industry needs and provide full disclosure to our services and work process.
How We Do Risk Management
Each PEO will have differences in its methodology, but these are the essential steps to the risk management process:
- Identify Potential Risks
While you may believe you are prepared for any eventuality, your business could be under risks you’ve never considered. There are four main types of risks in the workplace:
- Hazard risks – such as fires or injuries
- Operational risks – employee turnover and manufacturer failure
- Financial risks – economic recession
- Strategic risks – competition and reputation
Identifying your risks involves looking back at previous data, establishing patterns, and looking forward to potential risks in the future. By doing both, you can better understand the potential risks your business faces through day-to-day operations.
- Measure Frequency and Severity
The next step is to determine the likelihood of a risk becoming a reality. Next, we anticipate how often a risk is likely to occur and the severity of the risk’s capital loss. We then create a risk map to visualize where your business should optimize time and resources to improve.
- Explore Possible Solutions
We assess the frequency/severity of risks and brainstorm how to address these concerns. We do this through four methods:
- Accepting a risk may occur because the benefits outweigh the impact of a potential risk
- Avoiding activities or processes that are high risk
- Controlling the risk by implementing preventative tactics or reduce the effects of a potential risk
- Transferring responsibility of adverse risk outcomes to a third party.
- Choose and Implement Solution
We narrow down the solutions to create a plan catered to the most desired outcome for your business in terms of liability and profit. We also guide you through the process of implementing this plan throughout the entire organization.
- Monitor Results
Circumstances change, and so too do the needs of your business. Therefore, we ensure you access the most up-to-date risk management practices and anticipate what methods will be best for your organization’s long-term safety and profit.
“What is Risk Management?”Ask Canal HR
Canal HR specializes in PEO services for the southeast region. We have worked with hundreds of companies for their business needs and represent 4000 employees. Our clients are leaders in various industries, so we can handle any challenge you throw at us. Since we are located in Metairie, Louisiana, we interest in Louisiana PEO, including Louisiana payroll preparation, workers compensation, HR, and more. Administrative work is our specialty, so contact us to take on that responsibility so you can focus yours on the community and people you love.