Three Questions To Help Manage Risk and Enhance Value

One of the most important responsibilities of a leader is to evaluate and manage the risk within an organization. Unfortunately, this task is often either ignored or given minimal attention.

Everyone in an organization needs to be aware of minimizing risk, but the leader is ultimately charged with identifying risk factors, assessing their likelihood, and putting into place a plan to mitigate any impact on the business. The organization, your team members, and your family depend on you to carry out this important responsibility.

Risk comes in many forms—financial, customer, supplier, employee, cyber security, regulatory, environmental, litigation, leadership, technology, and so on. It permeates everything we do within a company, and by properly managing risks, you will put the organization in a position to reduce the impact if a risk factor comes to fruition.

Here is a basic roadmap that will help you fulfill your responsibility:

  • Understand a leader is ultimately responsible, but is not alone, in addressing the matter. Your managers should be assessing risk factors within their functional areas.
  • Have strategy sessions with your team to discuss areas of risk. What can go wrong? How might it impact your business? What actions do you need to take to minimize the impact? A leader’s job is to ask probing, thought-provoking questions that advance the discussions to an effective conclusion.
  • Meet with external confidants to discuss their perspectives on risk—board members, industry executives, your accountant, insurance broker, and attorney, friends, etc.
  • Develop and implement a plan that encompasses your conclusions.

Don’t ignore difficult decisions in hopes that nothing will go wrong!  Be forward-thinking.  Dedicate the necessary resources to accomplish your risk mitigation goals—consider it an investment, not a cost. Reducing risk is important to not only helping your business succeed, but also in maximizing its value. A buyer will evaluate risk—you need to do it too.

Too few leaders spend adequate time evaluating the risk factors within their organization. Are you giving this important matter proper consideration? If not, beware of unexpected events and the impact on your organization.

Stephen W. Christian, CPA

Stephen W. Christian is a director at Kreischer Miller. Contact him at Email or 215.441.4600. 

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