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You probably know it already – risk management is the art of managing risks, the technique of a leader in anticipating danger and putting systems in place to protect the business from such danger before it happens.

Anticipation

It begins with anticipation.

Can you imagine what a world of difference it would have made to the lives of the companies that I referred to above if they could have anticipated the dangers that hit them, and reacted accordingly? Of course, I speak with the benefit of hindsight and as an external observer. The truth is, they were in the hot seat, faced with doom and racing against the inevitable. The risk had materialised! The first question is, how well did they anticipate this?

The more you can anticipate, the better you can manage. You do not want to say, “I did not see it coming!” You want to see almost everything coming, or planning to come. This capacity is critical. You can acquire it by reading up on as many businesses as you can, especially those that have collapsed. Find out why, because you really do not want to fall into the same trap. Engage professionals in the field and ask them to help you anticipate potential risks. Be very negative; after all, that is the nature of risk. Instead of being over-optimistic, ask yourself, “What can go wrong in my business?”

Management

The next step is to develop a strategy and processes to deal with the identified risks. Your strategy should be underpinned by three questions:

1 How can I prevent it from happening?

2 How can I detect that it has happened?

3 How can I quickly put out the fire and correct the damage when it happens?

Trust me, business owners who are defrauded or stolen from internally by their employees do not see it until it is too late because question 2 was never answered in their risk management strategy. Those who get their cars stolen and lose business did not answer question 3. Those who experience one crisis after another suffer because they neglected to answer question 1.

For almost every major or significant risk that your business faces, you must answer the questions above. You truly cannot get past the risk without satisfying yourself that the answers make sense.