Posted: October 31st, 2022 3:03pm +00:00

How to save your business money with effective risk management

Save money with effective risk management

No business is without risk but you can save money with effective risk management.

Risk management should help ensure you achieve your objectives. Risk management is most effective when it is understood and championed at Board Level and then naturally filtered down the organisation.

Having identified the risks facing a business it is then a priority to plan and prepare in case these risks occur. When it comes to risk management it can be a bit of a juggling act, how much time and money spent to mitigate a risk should take into consideration the impact the risk will have on the business and likelihood of the risk occurring.

Risk management has also been shown to make a real difference to the bottom line. We are sure you can think of some of your own but here are some real-world examples of how effective risk management can save your business money.

  1. Less risk = Fewer insurance claims

If you can effectively reduce the risks in your business, then you will reduce the number of insurance claims received.  If an employee was to be injured at work, they would be entitled to compensation. This would increase a company’s insurance premium. Mitigations such as equipment training and an appropriate working environment will reduce the likelihood of an employee sustaining an injury. Reducing the likelihood will reduce claim volumes.

  1. Reduced insurance premiums

A reduction in insurance premiums can generate significant savings. Insurance premiums are usually calculated based on the risk exposure faced by an organisation. Risk management can reduce the overall exposure to the business and will therefore result in lower insurance premiums.

  1. Lower borrowing rates

Many organisations have certain standards or compliance regulations that they need to adhere to. Demonstrating adherence to compliance will ensure a positive auditing outcome. Better borrowing rates with a greater choice of providers will be available if an organsation can demonstrae effective risk management. Good risk management will essentially help with an organisation’s credit rating and has the potential to reduce costs through improved borrowing rates. Fairly obviously, a business is considered less of a liability if it can demonstrate good risk management and compliance.

  1. Conscious risk taking

Making decisions about the risks you are willing to take and to what level will also help you save money. You may be currently paying for controls that mitigate a risk completely, but this may not be necessary. Managing risks to the correct level in accordance with your risk appetite can save you money. For example, if the impact of a risk is low and the likelihood of the risk occurring is low then you don’t need to spend an exorbitant amount of money mitigating the risk. Appropriate mitigation levels will save you money and ensure funds are distributed more effectively.

  1. Save money and valuable resources

Save time, money and resources with effective risk management. Focus on running your business and increasing profits by reducing your time resolving issues.

  1. Emergency planning

Preparing for unforeseen circumstances or emergencies enables companies to overcome the emergency more quickly and with greater funds in their pocket. An organisation may not be able to recover from an emergency without risk management and all the hard work, money and resources and associated costs will be wasted.

Identifying issues that could prevent business objectives being met is business critical. Controls and mitigations will reduce the impact of a risk, allowing the business to operate with minimal disruption.

  1. Project management

The obvious risks of overspend or over run will be top of any Project Managers agenda when planning for, and managing any large project. It is because of this that risk management is integral to the process and as a discipline it is present in all project management methodologies.  When things go wrong the consequences can be devastating both financially and reputationally, remember the failed central government IT projects back in the 90’s that reputedly wasted over £26bn of tax payer money?

  1. Enterprise risk management software

Enterprise risk management software can assist to optimise both strategic and operational efficiency. It ensures that there is no duplication or indeed any holes in your risk management planning, by providing a centralised single source of truth. A centralised tool enables linking risk to actions, audit recommendations and other forms of compliance creating a more holistic approach. Learn from past mistakes and lessen the reliance on individuals’ knowledge.  An ERM system allows greater auditability and allows easy review of amendments and aids your compliance.

If you’d like to know more about how JCAD’s risk management tool, CORE, can save you money while enhancing your compliance, please get in touch for a demo.

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