You’ve probably heard how important it is to manage your company’s exposure to risks, but how do you know if your approach to risk management is sufficient? Below, we break down the 4 classic signs of an inadequate approach to risk management and the consequences of improper risk strategies.
Lack of risk assessment
If you don’t have a written risk management strategy, you’re not properly prepared for business challenges. No matter how small your business, you should have a risk strategy that lays out:
- The potential risks affecting your business
- The likelihood of these risks occurring
- The impact of each risk
- The steps you’ll take to respond to each risk
- The ways in which you’ll reduce your company’s exposure to each risk
If you don’t understand the risks affecting your business, then you can’t prepare for them. This can seriously affect your company’s reputation.
To complete your risk management strategy, you should also have a disaster recovery plan. Although 95 percent of businesses have some disaster recovery plan, over 20 percent admit to never testing this plan. Don’t wait until disaster strikes to check your disaster recovery plan – this could be catastrophic for your business.
If you haven’t updated your cybersecurity solutions in some time or if you don’t perform regular reviews of your cybersecurity infrastructure, it’s a security breach waiting to happen. Cyber threats are evolving all the time, and frequent cyber attacks – or successful attacks – may suggest that your network is vulnerable to intruders.
Failing to manage your exposure to cyber-attacks can result in data loss, data corruption, or data breaches, which may irrevocably damage your company’s reputation.
If you’re frequently experiencing crashing servers, lagging applications, hardware breakdowns, or other technical glitches, you’re not taking the right steps to protect your company from costly downtime.
Why is it important to reduce your downtime? It’s simple. The average business takes at least one hour to recover from downtime, and that hour alone can cost companies up to $10,000, according to recent reports. Stay offline for too long, and your business may not be able to recover.
Overspending or wasted costs
There’s no question that unexpected costs can and do arise. However, business risk management means taking every step possible to mitigate your company’s exposure to financial losses and failed projects.
For example, if you don’t calculate the risks and costs associated with expanding your company, you won’t be prepared if difficulties do arise. Similarly, you risk heavy financial losses if you don’t plan for changing market conditions.
The consequences of poor risk management
The potential damage caused by a lack of risk management or a poor risk management strategy can’t be overstated. Insufficient risk management can result in:
- Irreparable damage to your company’s reputation
- Steep financial losses
- Serious cybersecurity breaches
- Exposure to lawsuits
Put simply, risk management is non-negotiable, but the good news is that managed services providers can help you devise an effective risk management strategy that encourages company growth while mitigating your exposure to unnecessary – and costly – risks.
An effective risk management strategy is one of the best ways to reduce downtime, minimize your risk of a cyberattack, and grow your business. To find out more about risk management and how to assess your own business risks, contact us today.