Award Winning Pan-African Firm
Liaison House, State House Avenue
Available 24 hours, 7 days a week
(254) 703 071 000

5 Reasons why Risk Management is Important for your Business?

August 16, 2023

Risk management is a vital part of any business. There is a lot of risk involved when running any kind of business. A business is always one mistake away from bankruptcy. Risk management becomes key for the sustainability of your business. It helps in avoiding financial losses and making your business more stable and flexible.

It also makes you take necessary steps to protect your business from future risks. The issue is not uniquely Kenyan but businesses across the world have a considerable amount of risk. The entire process involves identification, analysis, evaluation, control and monitoring of risks.

In this article we outline 5 reasons why it is an integral part of any business in Kenya.

#1 Risk Management Helps in Mitigating Losses

It can be done by following a systematic process, which involves identifying and evaluating risks, taking preventive steps and planning for contingencies.

Risks can be avoided by identifying them first, evaluating them and then taking corrective measures to mitigate them. Risk assessment is an important part of its management because it identifies potential threats to your business before they happen so that you can take action against them before they cause damage.

Every business should have some form of system in place to manage risk, so that its employees know what to do if something goes wrong or changes unexpectedly during their workday or even at night.

#2 It Makes your Business more Stable and Flexible.

It helps in reducing the cost of insurance. It saves time, money and resources by taking necessary steps to protect your business from future risks.

The risk management process involves identifying all potential risks that could impact on the success of a project or organization, analysing them so that you can take action to minimize their impact on performance should they occur, monitoring progress towards mitigating those risks through regular reviews with colleagues involved in similar projects, reporting back regularly on progress towards mitigating identified risks.

#3 Risk Management Helps in Reducing the Cost of Insurance

We all know that insurance can get very costly. While you cannot entirely do away with it, keeping the cost low will interest any business. This is one of the most important benefits of management of risk as it helps in reducing premium, risk and other expenses related to insurance.

If you have a well-planned system in place to manage risk, then it will help you reduce your premium amount. The system will provide accurate information about your business activities. This will help insurers understand how much risk they are taking when insuring your company or organization.

This can lead them charging lower premiums than what they would have charged otherwise. With this information, they know that there is no major financial loss involved if something goes wrong with their policy holder’s business operations due to unforeseen circumstances.

#4 Risk Management Saves Time, Money and Resources.

It saves time, money and resources by identifying the risk and taking necessary steps to avoid it. It allows you to take necessary steps to protect your business from future risks by anticipating them beforehand.

It saves money as well as resources because once a risk has been identified and avoided or mitigated against then there is no need for further expenditure on prevention techniques such as insurance policies etc.

#5 Protects your Business from Future Risks

It makes you take necessary steps to protect your business from future risks. It is the most important part of financial planning, which helps in making your business more stable and sustainable.

By implementing risk management strategies, businesses can significantly reduce insurance costs and allocate valuable time, money, and resources towards other critical areas of their operations. Effective risk management also enables companies to steer clear of losses incurred due to uncontrollable events, such as natural disasters like floods and earthquakes, and mitigate risks by taking proactive measures before they materialize.

It is important for every business to have a proper risk management system in place for their smooth functioning.

Your Business Needs it

Having an effective risk management system is crucial for businesses, as it enables them to mitigate potential losses and enhance their stability. By implementing risk management, companies can lower insurance costs and save valuable time, money, and resources. Furthermore, a well-designed risk management system empowers businesses to proactively safeguard themselves against future risks.

So, if you are a business owner or want to start your own business, then it is important that you understand the importance of risk management and implement it in your organization.

Love this article? Share the love…

Leave a Reply

Your email address will not be published. Required fields are marked *