A question we are often asked is how to classify risk.

As we mentioned in a recent article, the best way to eat the risk elephant is one mouthful at a time.

Practically, what this means is that we look closely at the components that make up the business and identify the risks it faces in each sub-process.

This is then classified into sub groups such as financial, compliance/legal, operational, commercial, safety, equipment, security, reputational, technology.

Each…

The same way you would eat any elephant. One mouthful at a time!

Starting to address risk in a business can appear overwhelming, and it is true that when you start looking at it, it is everywhere.

Of course that is what business is actually all about isn’t it?  Managing the risk:reward equation.

If the risk outweighs the reward, then the enterprise is not worth the effort.

We believe that enterprises should first address risks in the financial area of…

The penchant for teenagers to wander around with untied shoelaces these days reminds me of my mother’s admonition to “look where you’re going or you will fall and crack your skull”.

Of course, convincing a teenager (or any child for that matter) that you, as an adult, do in fact know better, is often as difficult as convincing business owners that risk costs money.

In the example of the teenager…

This excellent article from CFO magazine sets out a commonly used  methodology for quantifying and prioritising risk.

An example from MSFS risk management process is the detailed break-down of all the steps from initiation of a sales order until final receipt of your debtors funds.

We then look at each step and ask the question "What could go wrong and what is the effect of this on the business"

The risk of each step is then calculated using the formula…