New Technique In Store: It’s Time For Risk Management With CSR
Step onto the industry and the most heard terms will be “Business ethics” and “corporate social responsibilities.” Typically, the later represents the company’s response on the former. In fact, CSR largely influences a company’s behavior and approach towards environmental, communal, and financial issues. If illustrated, this corporate accountability embodies the positive actions which win over an organization’s negative impact on those issues. And, this whole concept is defined as risk management in the industry.
Here’s an example that will help you gain an inside-out notion on this affair. Say for example a multination firm periodically reviews its company employment policies, keeping a track of the past records. The sole reason is nothing but avoiding any sort of legal lawsuits on the context of human right abuse or violation of corporate values. Thereby, the company performs at par with the potential working standards and the entire scenario is labelled as “risk management.”
So, what is actually meant by “risk” in a business?
A short definition of risk will point to those business factors that threatens an organization’s ability to meet its commercial objectives and financial targets. However, the underlying idea extends beyond it. In a broader sense, risk refers to environments where multiple internal and external factors or stakeholders brings in critical modes and the company fails to perform at its best resulting in loses and negative impressions. From economy to directive, business risks can grow at any point creating adverse situations difficult of handling. That’s the reason, experts suggest periodical risk analysis to every company, irrespective of it being small or big. By this way, entrepreneurs can keep a tab of the potential jeopardies that may or may not hit the organization.
Normally, there are four significant fields of risk in trade and commerce. Following list will make you conversant with those areas.
Major “risk” categories
Risks point to perilous operations, financial problems, strategical failures and more like that. Take a look at the significant ones – mostly met in the way of a smooth project accomplishment.
Operational Risk – Threats seen in functioning, mostly, occur when a retailer unexpectedly meets with failure in everyday operations and maneuvers. It can be any sort of technical catastrophe, inefficiency of employees, server outage, or anything like “process failure.” Sometimes, the risk can also stem from external factors like natural disaster and power cut. Although these issues look small and insignificant or just a matter of time, but it leads to greater financial risks in most cases. Keeping backup is a preeminent way of escaping these operational risks.
Compliance Risk – Laws, regulations and criterions change with different nation. When the divisional structures of any organization violate the respective regional rules, it is regarded as geographical compliance risk. Besides, you may also incur product compliance risk. It happens while expanding the product line of a company.
Example of geographical compliance risk: When a U.S. based store expands the business in European countries without being aware of British rules and regulations.
Example of product compliance risk: When a New York based food selling farm starts retailing wine without maintaining compliance with the raft of alcohol vending.
Financial Risk – Most of the business hazards fall under financial risks. It may be in terms of lost revenue, additional cost requirement of any project or huge capital obligation. Excessive proportions of debt are also defined as financial threat. Sometimes, sudden change in tax rate cause a risk. Getting over these problems are critical if not known beforehand. Only with periodical market analysis and company analysis, this risk can be overcome.
Financial risk embraces a customer aspect, as well. When a consumer fails to pay or repay the due amount (mostly when the amount is big), company lands into trouble. So, choose your customers wisely and make your policies clear before any setting up any kind of business relation.
Strategic Risk – Every road to success is enclosed with insightful and perceptive strategies which smoothens the path bypassing every veiled difficulty. But if not strategized properly, your business may see a downfall. Also, it is true that even the best-laid tactics can go wrong depending on the circumstances. Sometimes, it may happen that your intuitive strategy ends up being an outdated one. Competitions are high these days and so are innovations. Make sure the business plan for your organization is a contemporary one.
orporate social responsibilities in managing risks
De-risking is a human resource perspective within the organization. From its development to implementation, HR plays the most significant role and defines the policies, which in turn support employees in facing threats. Precisely, it is the new tool in market that prepares a company, beforehand, for fighting every risk with utmost potential and professionalism.
The foremost concern in beating risks is to detect the issue. Through a deep-rooted analysis find the origin of the problem and identify the causes behind this hindrance. Perform a company analysis, evaluating every possible sector. If you think strategy-analysis is not important in financial risks, then you are absolutely wrong! You never know that the economic problem occurring today has originated years back from an impromptu strategic decision managementpaper.
Upholding corporate social responsibility from the day of foundation is one astute thought in trouncing Immediately, build an organizational culture having the sense of transparency, inclusiveness and accountability. This is a beneficial idea as suppliers and staffs detect risk and warn about the impending situation.
Besides benchmarking the performance status of your organization, CSR postulates a few more activities in the context of risk detection. Pay a quick look before threat hits your organization –
· Seasonal workshops to increase engagement among suppliers and staffs with a motive of exploring the areas of threats
· Periodically, company policy and statement should be reviewed in order to ensure that the recruitment, training, procurement and appraisal processes are consistent.
· During meetings, show instances where employees can promote well-behavior and also, develop internal sites having examples of good practice.
· Your business in not only your business – involve staffs and consult with them regarding strategies and plans.
· Offer organizational magazines having raft of customer feedbacks, and its position in the world map so that employees can understand that the company is upholding its values.
Many studies revealed that companies are put in the face of risk if employee engagement isn’t performed properly. From financial managers to in-house technicians, you must them periodically in order to discuss the possible problems and impending threats. Abiding by these techniques will ease your risk management. In fact, these ideas prevent risks from coming up.