Top 6 Types of Risk to Manage for Your Organization Today

Top 6 Types of Risk to Manage for Your Organization Today

Running a business comes with a lot of responsibility - and that means assuming some level of risk. Safety protocols and training can look very different depending on your industry, which means managing risk assessments for your organization is more likely to be successful when you are forward thinking and systematic in your approach. The benefits of doing so are about much more than just legal protection; a workplace environment that values and implements risk assessment procedures also improves employee culture, protects clients, produces better work product, and contributes to your company’s overall sustainability, empowering you to build the kind of business that you can be proud of.

So where do you start? The different ways things can go wrong for your company may feel too numerous to quantify and making decisions based on those risks can be difficult, but we’re here to break down potential risk analysis categories, helping you to mitigate or even completely avoid dangerous and costly disasters. 

6 Key Types of Risks to Manage

Here are 6 risk types that you need to manage for your organization:

Physical Safety Risks

One of the most common and obvious types of risks faced by you and your employees will be risks to physical safety, which can vary greatly depending on your industry. Anyone can fall victim to simple-seeming injuries like slips, trips, and falls - sometimes with grave, ongoing consequences. Or, if your team works with heavy loads or repeatedly twists to move materials from one location to another, they may be at a greater risk of back injury. In fact, back injuries are suffered by more than one million workers every year, account for 20% of all workplace injuries, and cost companies billions of dollars. These are just a couple of the everyday injuries you’ll need to consider.

Other common risks you need to account for include indoor air quality, ensuring proper cleaning and maintenance of your ventilation, heating, and cooling systems to prevent issues with allergens that can lead to occupational asthma. Cleanliness and regular sanitization of common areas like bathrooms, kitchens, and break rooms can prevent the spread of illness or mold growth. Clear fire safety protocols and procedures are necessary, as well as active shooter prevention training.

Once you identify the various physical risks that do or could impact your team, you can develop a response plan and take advantage of evidence-based, online training like those offered by Vector to keep your team prepared and protected.

Mental Health Risks

Another category of risk that you’ll need to assess for your organization is no less important than physical safety risks and may even be more insidious due to its greater lack of visibility: mental health risks. In our world, depression is the leading cause of disability and mental health disorders, costing the global economy $1 trillion in lost productivity a year. This means that, when it comes to mental health issues in the workplace, taking a hands-off approach will only hurt your business. Even more importantly: it hurts your valued and talented people.

Everyone faces a certain amount of stress or interpersonal conflict in their everyday life, which includes their work life. Fortunately, there are many tools at your disposal to help you evaluate the mental health needs and risks faced by your team so that you can either prevent them or effectively respond to them. 

Retention Risks

There are many reasons an employee may put in their notice at a job. This can be part of the natural ebb and flow of staffing at an organization - or not. Either way, the loss can be expensive. In fact, according to Gallup, the cost of replacing a salaried employee can be up to two times the employee’s annual salary, which means that retention risk assessment is something you and your HR department can’t afford to ignore. This type of risk assessment should focus on two main areas: 1) The risk of your employees choosing to leave your organization because they are unhappy, and 2) the risk of losing specific people in specific roles and how your organization would be affected by those losses.

In many cases, low rates of employee retention can be linked to lack of training and advancement opportunities. In 2021, 27% of millennials considered leaving or left their job, citing lack of growth and training and development opportunities as the prevailing reasons why. We know that learning and training are critical to retaining happy employees, so your risk assessment plan in this area should focus on providing your team with ample learning and development opportunities, as well as clear protocols for what they can do to get help if they are having problems on the job, with other employees, or with their supervisors.

Cybersecurity Risks

With the increased digitization of our data and with technological advancements come the increased possibility of cybersecurity challenges. Businesses have to be proactive when it comes to protecting their data by taking this kind of risk assessment seriously. Effective cybersecurity training, like Vector’s online training catalog dedicated to the topic, can help identify cybersecurity vulnerabilities in your procedures and systems, provide practical solutions to protect your organization, and help to keep your team knowledgeable and prepared when it comes to cybersecurity safety protocols. And the negative effects of ignoring cybersecurity risks can be nearly impossible to overcome. One frightening statistic from Cybercrime Magazine said that 60% of small businesses struggle to recover and have to close up shop within six months of a data breach or cyberattack.

Financial Risk

One category of risk you need to manage that really has the power to make or break your organization, depending on how you assess and respond to those risks, are financial or economic risks. According to Investopedia, there are at least four major kinds of financial risks that business owners face:

  • Market Risk
  • Credit Risk
  • Liquidity Risk
  • Operational Risk

Your job is to identify how these affect your organization and make a plan. Risk assessment in these areas will allow your business to more readily adapt when bad things happen, like if you are outmaneuvered by a competitor, face cash flow issues, or have to deal with a lawsuit.

Reputational Risks

When you fail to meet the expectations of your stakeholders, you will likely end up dealing with negative fallout. According to Harvard Business Review, 70% to 80% of market value comes from hard-to-assess intangible assets such as brand equity, intellectual capital, and goodwill, meaning that your organization is especially vulnerable to anything that damages your reputation. That’s why it is so important to evaluate your reputational risks.

Although damage to your business’s reputation can obviously come from your own direct actions, your business may also be caught in the crosshairs of public opinion indirectly based upon the actions of current or former employees, mishandled cyber attacks, and the actions of business partners and other associates.

A good place to start with risk analysis for your reputation is with understanding your company’s current, baseline reputation. Once you evaluate this, you are in a better position to create a risk management plan. Areas to consider in your evaluation include:

  • Social Media Mentions
  • News Coverage
  • Organizational Leadership
  • Data Leaks
  • Negative Feedback

Benefits of Forward-Thinking Risk Assessment Procedures

It can be tempting to put risk assessment procedures on the back burner. After all, as this article points out, there are many types of risk that an organization must analyze and manage. The time and money required to do this may seem difficult - or simply overkill. That being said, the cost of just ignoring potential risks could open up your business to costly injuries, cybersecurity breaches, an unhappy workforce that is constantly turning over, devastating financial losses, and a reputation tarnished beyond recognition.

An important thing to remember is that risk management is not a one-size-fits-all process you invest in once and then are done. Indeed, risk management is cyclical and can include many different types of approaches. By proactively and preemptively engaging in risk assessment, your organization will be more prepared to weather the storm in hard times - or, even better, avoid the storm altogether. 

Want to Know More?

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