Risk is unavoidable, but this doesn't mean that risk can't be planned for. To make better-calculated strategic choices, set clear expectations and always be prepared for different outcomes, use our Risk Management presentation. This presentation allows you to roll with the punches at all times and outline ways to monitor and control unpredictable events.
Go over your risk assessment with this slide. List the hazards, and explain why and how they may affect your venture, propose precautions, introduce risk management strategy and obtain feedback to make necessary changes.
One of the risk assessment tools to consider is the risk assessment matrix. Identify risks, calculate consequences, determine risk rating, create an action plan, then plug data into your risk assessment matrix.
Introduce your risk mitigation plan to your audience with this slide. A risk mitigation plan helps to eliminate or minimize the impact of the hazards events and develop options and actions to enhance opportunities and reduce threats.
According to Risk Management, there are three categories of risk:
- Preventable risksn – these are internal risks, arising from within the organization, that are controllable and ought to be eliminated or avoided. Examples of preventable risks include the risks from employees' and managers' unauthorized, illegal, unethical, incorrect or inappropriate actions and the risks from breakdowns in routine operational processes.
- Strategy risks – companies voluntarily accept some risk in order to generate superior returns from their strategies. "A bank assumes credit risk, for example, when it lends money; many companies take on risks through their research and development activities," the experts say.
- External risks – some risks arise from events outside the company and are beyond its influence or control, such as natural and political disasters and major macroeconomic changes. External risks require unique approach. Because companies cannot prevent such events from occurring, their management must focus on identification and mitigation of their impact.
To develop a risk management strategy, use this six-step process, recommended by business solution platform, EDC:
- Identify the risk – identify risks with regular brainstorming sessions that involve staff from all departments. The experts say it's crucial to look at current risks and have the vision to identify future risks.
- Analyze the risk – conduct an in-depth risk analysis. It can be difficult if you don't have all the information, but the checklist can best prepare you to identify those risks and how they can potentially impact your business in both operational and financial terms.
- Prioritize the risk – a large list of risks can be overwhelming, so it's critical to prioritize the risks so you can address the most pressing of them first. Once you have the checklist, go one step further and classify risks as high, medium or low.
- Assign responsibility to the risk – ensure there is someone in the organization that's going to own and oversee the risk management. "Determining who will be responsible is an internal company decision; it could be someone who works in a specific risk area who is best suited to tackle the risk or an arbitrary choice. It's a best practice to develop a risk management team consisting of both internal and, if applicable, external people in your supply chain," the experts say.
- Respond to the risk – develop a strong risk management plan that covers: risk management team, market information and market entry information, contracts and getting paid, quality and performance systems and processes, insurance and cash flow protection.
- Monitor the risk – things will change in your company and so will the risks. "As these changes occur, it's critical to update your plan to ensure that you don't become complacent or lose sight of potential threats to your business. Incorporating an ongoing review of your risk management plan into the company's planning activities will ensure you are on top of any potential risks," the EDC team says.
When COVID-19 crept up on the world, companies like Apple ended up being "especially vulnerable because of their large customer base in China and the dependence of their supply chain on Chinese manufacturers," Amiyatosh Purnanandam, professor of finance at the Ross School of Business, University of Michigan, writes in his article for Forbes.
Tim Cook named the impact of coronavirus as a significant source of uncertainty in the company during Q1 2020 earnings call. At the time, Apple had restricted employee travel and shut one store in China due to the virus outbreak, and was cutting back on retail store hours in China as well.
Purnanandam meditates on the question of what can the managers do to control risks that are not even identifiable? "Unlike exchange rates or commodity prices, there are no market-based derivatives contracts that can be used to hedge such a threat," Purnanandam writes. He's answer is cash balance. Cash balance is the best vaccine against unpredictable events such as the pandemic, Purnanandam writes. Moreover, he believes that cash is actually the best hedge against any risk that cannot be identified or quantified ahead of time. So in case of Apple, a $200 billion pile of cash is what makes it resistant to the risk.