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Risk management: A practical guide for businesses

Risk management: A practical guide for businesses

Author NameBy Ima Ocon
•
January 31st, 2025
• 8 min read
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Table of contents

  • What is risk management?
  • Benefits of risk management
  • Common risks for businesses
  • Three key steps in risk management
  • App and software for risk management checklists
Choose from our 10,000+ free, customizable templates.
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Summary

Learn what risk management is, why it’s crucial for businesses, and how to implement it effectively. This guide covers key steps and examples to help you identify and mitigate risks in your workplace.

From operational delays to natural disasters, it’s unavoidable for businesses to encounter sudden challenges every year–but risk management gives you a stronger safety net. If you’re aware of hazards at your workplace and have strong control measures in place, your business becomes more resilient.

Read on to find out about how to set up robust risk management at your workplace, complete with practical steps for creating your own plan. With this guide, you’ll be able to manage risks more effectively so you can protect your team and strengthen compliance with regulations.

What is risk management?

Risk management involves creating a framework to identify and address potential risks and hazards associated with a company. It is part of occupational safety and health–after all, businesses face risks, and there must be a proactive approach to these so they don’t lead to accidents or disruptions.

To conduct risk management, you’ll typically need tools like checklists and audits to be thorough. For example, you can use a risk management checklist during routine inspections to flag issues like faulty equipment or gaps in compliance.

There are also established standards like ISO 31000 and NIST SP 800-30 that many companies around the world follow.

Benefits of risk management

Risk management is already an essential practice for businesses across diverse industries, and it’s even expected. Here’s why:

  • Improved safety in the workplace. With risk management, businesses can significantly reduce the chances of accidents and injuries.
  • Better compliance with regulations. It enables your organization to meet regulatory requirements, avoiding expensive fines as well as legal problems.
  • Higher efficiency. By addressing risks early on, you can prevent disruptions, work more efficiently, and even save on costs.
  • Better decision-making. By knowing the potential risks and their impact, leaders can plan more strategically.
  • Stronger reputation and trust. If your company makes risk management a priority, employees and clients will see you as more reliable and responsible.

With proper risk management practices, businesses can gain a competitive edge and greater confidence moving forward.

Common risks for businesses

Here are key risks to take into account during the risk management process:

  • Operational risks: Inefficiencies or disruptions in daily processes, like equipment breakdowns or supply chain delays.
  • Financial risks: These threaten the business’s ability to pay bills or remain stable, like cash flow shortages or rising operational costs.
  • Compliance and legal risks: Failing to adhere to industry regulations or laws, such as safety standards, labor laws, or data privacy rules.
  • Cybersecurity risks: Include hacking, phishing, and data breaches, especially as businesses rely more on digital tools.
  • Environmental and natural risks: Natural disasters like floods, earthquakes, or storms can disrupt operations and damage infrastructure.
  • Reputational risks: Include negative press or social media controversies, often stemming from missteps in customer service.
  • Human resource risks: Challenges like high employee turnover, lack of proper training, or workplace conflicts.

Three key steps in risk management

A risk management plan is a document that helps you identify, evaluate, and plan for potential issues that could come up during work. It’s like a roadmap that shows you every pothole and accident-prone corner on your path so you can avoid, re-route, or, at the bare minimum.

This can seem like a big task, but it becomes more manageable when you break it into clear steps.

Step 1: Risk identification

First, take a close look at your company’s operations and environment to spot anything that might be harmful or cause disruptions, including:

  • Equipment
  • Employee tasks
  • The physical workplace
  • External factors like suppliers or weather conditions

Talk to employees, managers, and anyone involved in daily operations since they’re aware of risks you might not have noticed. You can also check past records, such as accident reports, to identify consistent issues. Don’t rush this first step—it’s the foundation for all of the steps that follow.

Example: In a manufacturing plant, you might identify risks like machine breakdowns, chemical spills, or insufficient training.

Step 2: Risk Assessment

After identifying risks, you’ll conduct a thorough analysis (with the help of expert personnel) of their impact and address high-priority risks first.

Since you’ll be assessing several risks, you can use a risk matrix. It’s a simple grid where you’ll categorize risks based on two factors: their likelihood (how likely they are to happen) and their impact (how severe the consequences would be). You’ll then place each risk on the matrix based on these two criteria.

Risks in the high likelihood and severe impact category are top priorities, while you can address the low likelihood and minor impact risks afterwards.

Example: Forklift accidents would be top priority since forklifts are used daily and improper use can cause injuries or even fatalities. On the other hand, ergonomic issues (or poor desk setup) in an office would be low priority since it’s not as urgent to resolve them.

To make risk assessment easier, you can download any of these templates from Lumiform, which guide you through the process with clear prompts.

Step 3: Corrective actions

A risk management plan outlines the strategies and resources you’ll need to control the risks from above and minimize their impact. To start, prioritize the risks based on your assessment then define corrective for each.

Example: If data breaches are high priority for your company, your plan might include implementing stronger cybersecurity measures, such as multi-factor authentication, regular software updates, and data encryption, as well as regular security training for employees.

Assign clear responsibilities to team members, so everyone knows their role in managing risks, and set deadlines for implementing controls. For less critical risks, your plan might include continuous monitoring or periodic reviews to check if they’re still manageable.

Step 4: Monitoring

Risk management doesn’t stop after implementing the corrective actions—it’s an ongoing process that needs continuous monitoring, especially since risks can evolve over time. You’ll have to review the effectiveness of your corrective measures regularly to make sure that they’re working as intended and they’re still relevant to your situation.

To monitor risks effectively, assign regular checks and updates. For example, schedule monthly audits for high-risk areas, such as equipment safety or compliance documentation, and establish a system for employees to report emerging concerns.

Keep stakeholders informed too about any changes in the risk management plan, and provide ongoing training so everyone is aware of their responsibilities.

App and software for risk management checklists

With Lumiform’s mobile app, you can easily access and store your risk management plan on your mobile device, automatically generate reports after an inspection, and seamlessly share them with the appropriate people. With the desktop software you create risk management checklists or forms, and evaluate the data collected in the field. This significantly reduces the risk of quality loss, documentation errors and damage to reputation.

Using Lumiform in your digital risk management process helps you create rich data sets to better support your decisions and encourages compliance within your organization. No longer using paper-based risk management templates saves you time and money. Take the benefits of digitalization into your risk management process:

  • Generate real-time data about your processes. This makes risks and safety measurable for the first time and you can use the data to continuously improve processes.
  • Get a general overview of everything that happens in the field.
  • Generate risk management reports automatically, which saves you the need to do all the manual follow-up work.
  • Share reports immediately with multiple recipients. Reports are shareable in multiple formats.
  • Increase the efficiency of your internal processes: Solve incidents up to 4x faster than before through more efficient communication within the team, with third parties and with management and faster reporting of incidents
  • Save time with easier analysis of all data and faster identification of areas that need your attention.
  • Continuous improvement of quality and safety: With the flexible form builder you can continuously optimize internal checks and processes. The Lumiform guides the examiner through the exam, no training is required.
  • Very easy to use with no margin for error for employees. The app offers less complexity in documenting or filling out risk management checklists than complicated paper or Excel lists.

Get started with Lumiform today and experience how its digital tools can transform your risk management process!

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Choose from our 10,000+ free, customizable templates.
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Frequently asked questions

How do I get employees involved in risk management?

Explain why risk management matters to employees and how it affects their safety and the company’s success. Involve them in identifying risks by conducting walk-throughs or brainstorming sessions. Provide training so they can spot hazards and know how to respond, and encourage them to report issues, no matter how minor.

How can I test the effectiveness of a risk management strategy?

To test your strategy, conduct regular audits and drills, and review real-world outcomes. Look at incident reports or near-miss data to evaluate whether risks are being managed appropriately. For example, if slips are still happening despite anti-slip mats, it may indicate a flaw in your strategy.

What role does technology play in modern risk management?

Technology streamlines risk management by automating processes, improving data accuracy, and providing real-time insights. For example, Lumiform allows businesses to track and assess risks efficiently, generate detailed reports, and assign corrective actions. Advanced technologies, such as AI and machine learning, can even analyze trends and predict future risks.

Author
Ima Ocon
Ima is a writer and editor who specializes in technology, with experience crafting content for companies like Canva and FluentU. She's passionate about startups, remote work, and language learning, as well as the applications of AI in marketing. Currently, she is based in Asia, and she previously studied in Taiwan and Singapore.
Lumiform offers innovative software to streamline frontline workflows. With over 12,000 ready-to-use templates or custom digital forms, organizations can increase efficiency and automate key business processes. The platform is particularly user-friendly, offering advanced reporting capabilities and powerful logic functions that enable automated solutions for standardized workflows. Discover the transformative potential of Lumiform to optimize your frontline workflows. Learn more about the product

Related categories

  • Risk and compliance
  • General
  • Risk assessment

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