Risk management means many things to many different people. To most professionals in risk management fields, they mean a specific set of problems confined to a more-or-less well-defined role. The HR manager, for example, is concerned with controlling the risks associated with hiring, firing, promoting, demoting, and managing employer/employee relations. The insurance adjuster hedges the risk of individual loss incidents with premiums. The factory foreman is concerned with worker safety and labor management. And so on.
Whether they know it or not, each of these risk management professionals is implicitly involved in tasks that have far-reaching implications for the entire company and that implicate hugely diverse skill sets. The HR manager might be hiring an employee, and in the process actively cultivating a new direction in corporate culture, implicating unknown tax rules in jurisdiction of the hiree's work site, or bumping the company over a legislated headcount threshold for health insurance or small business designation. The insurance adjuster might have the perfect formula for predicting disasters, but unknowingly is only able to hedge those risks by adding uncompetitive premiums to her standard insurance packages. The factory foreman may be excellently-credentialed in matters of workplace safety, but if he doesn't keep up with the latest developments of the minutiae of OSHA regulations, it is only a matter of time before his education becomes a liability for the company.
Risks don't just affect the entire company in the sense that a bad bottom line means everybody's out of a job. The biggest risks affect the entire company because they have a lot of moving parts in a lot of different wheelhouses. Unless your company can afford a brigade of high-powered attorneys as full-time general counsel, you will never be fully aware of all of the rules and regulations that might possibly apply to your business. And even if you had them, there are more risks than just the laws: there's the market, the particular politics of your vendors and suppliers, the attitudes of your customers, even the conditions of nature and the weather that might affect your business.
In my career I have learned that the approach to risk management that puts different risk management professionals in different boxes is a mistake. The HR manager and the factory foreman should engage on a regular basis just as a salesperson and a marketing professional should work hand-in-hand: their roles are complementary and necessary to each other. General counsel, if the company has one, should be involved at every level of significant decision-making, not just at the point of crisis when it is too late to do anything but cook up a settlement offer.
Most companies, however, cannot afford this arsenal of qualified risk management personnel. Today's small to mid-sized business does not have a rigid hierarchy or an org chart with one section helpfully blocked off as "risk managers." That is why consultancies like C-Squared exist. Dedicated risk management consultants exist to provide the foresight and knowledge necessary to control the unforeseen traps in starting your business, expanding it, or putting it through a significant or sudden change.
Large companies engage full-time risk management personnel because they are constantly being exposed to new risks. When you are smaller and starting off, it may be a more worthwhile investment to have a comprehensive assessment of your current and future risks from an outside professional than to assume the burden of taking on full-time, salaried personnel who may be highly qualified but may simply not have enough work to do at a smaller business.
Either way, risk management only becomes more critical to your success as your opportunities grow, since opportunities tend to be large precisely because of their risks. How long will you let the risks lurking behind the growth of your business add up before you decide its time to make sure your opportunities are bigger than the dangers they bring with them?
Whether they know it or not, each of these risk management professionals is implicitly involved in tasks that have far-reaching implications for the entire company and that implicate hugely diverse skill sets. The HR manager might be hiring an employee, and in the process actively cultivating a new direction in corporate culture, implicating unknown tax rules in jurisdiction of the hiree's work site, or bumping the company over a legislated headcount threshold for health insurance or small business designation. The insurance adjuster might have the perfect formula for predicting disasters, but unknowingly is only able to hedge those risks by adding uncompetitive premiums to her standard insurance packages. The factory foreman may be excellently-credentialed in matters of workplace safety, but if he doesn't keep up with the latest developments of the minutiae of OSHA regulations, it is only a matter of time before his education becomes a liability for the company.
Risks don't just affect the entire company in the sense that a bad bottom line means everybody's out of a job. The biggest risks affect the entire company because they have a lot of moving parts in a lot of different wheelhouses. Unless your company can afford a brigade of high-powered attorneys as full-time general counsel, you will never be fully aware of all of the rules and regulations that might possibly apply to your business. And even if you had them, there are more risks than just the laws: there's the market, the particular politics of your vendors and suppliers, the attitudes of your customers, even the conditions of nature and the weather that might affect your business.
In my career I have learned that the approach to risk management that puts different risk management professionals in different boxes is a mistake. The HR manager and the factory foreman should engage on a regular basis just as a salesperson and a marketing professional should work hand-in-hand: their roles are complementary and necessary to each other. General counsel, if the company has one, should be involved at every level of significant decision-making, not just at the point of crisis when it is too late to do anything but cook up a settlement offer.
Most companies, however, cannot afford this arsenal of qualified risk management personnel. Today's small to mid-sized business does not have a rigid hierarchy or an org chart with one section helpfully blocked off as "risk managers." That is why consultancies like C-Squared exist. Dedicated risk management consultants exist to provide the foresight and knowledge necessary to control the unforeseen traps in starting your business, expanding it, or putting it through a significant or sudden change.
Large companies engage full-time risk management personnel because they are constantly being exposed to new risks. When you are smaller and starting off, it may be a more worthwhile investment to have a comprehensive assessment of your current and future risks from an outside professional than to assume the burden of taking on full-time, salaried personnel who may be highly qualified but may simply not have enough work to do at a smaller business.
Either way, risk management only becomes more critical to your success as your opportunities grow, since opportunities tend to be large precisely because of their risks. How long will you let the risks lurking behind the growth of your business add up before you decide its time to make sure your opportunities are bigger than the dangers they bring with them?
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