Just as policyholders purchase life insurance to protect their families from risk, successful companies often utilize risk management procedures to protect their assets in case of an emergency. There is no doubt that the recent coronavirus pandemic came as a shock to most Americans, but some businesses were more prepared than others due to how they minimize or handle risks. For business owners without strong risk mitigation strategies in place, it’s not too late to create a game plan for times of crisis.
Successful Businesses During COVID-19
The onset of COVID-19 in America hit businesses hard. Tens of millions of Americans lost their jobs in what World Bank predicts is the start of the deepest economic recession since WWII. With international production and trade severely impacted, economic activity is predicted to decrease by seven percent, overall. Throughout the past months, the world has seen countless businesses close, but many of the companies thriving through the chaos have one thing in common: pre-existing, well-thought-out risk management procedures.
Risk management tactics can help safeguard a business, says Strategy and Operations Partner Stijn Spitaels of EY Belgium. Spitaels states that “By constantly identifying, prioritizing, managing, and responding to multiple risks, companies can ensure their future. A solid risk management approach also helps companies safeguard the wellbeing of their people, clients, and other stakeholders. It’s therefore key to have the right organization, people, and processes in place.”
Spitaels also provides a basic groundwork from which organizations can start to develop their own risk management strategies. The framework is comprised of six steps.
- Create a task force to manage any unexpected events or crises.
- Constantly identify risks and dangers as they come up.
- Prioritize those risks by order or potential impact and likelihood of the event occurring.
- Plan a course of action.
- “Plan, monitor, act, evaluate – Repeat”
- Stay organized and monitor the organization for any changes.
Risk Management is Relatively Uncommon
According to the QBE North America 2020 Mid-Sized Company Risk Report, analyzed in the Insurance Journal West Magazine, 60 percent of mid-sized organizations do not have adequate crisis management plans in place. 60 percent of survey respondents in the same study also reported that their companies lacked programs that informed workers on how to reduce risk exposure.
Researchers from the same study also asked participants what kinds of risk management procedures were in place within their organizations. Shockingly, just above one-third, on average, of the organizations analyzed included one or more of the listed risk mitigation strategies listed, including pandemic-specific, macroeconomic-focused in case of a recession, natural disaster-based, and climate change-oriented risk management procedures.
Better Late than Never
There is still hope for those businesses that had limited risk management procedures in place at the start of the pandemic. Of course, planning for something after it occurs is not ideal, but coming up with a plan of action rather than making decisions with no discussed guidelines is highly ineffective. In an interview with Corporate Compliance Insights, Kim Hirsch of Fusion Risk Management claims that managers and executives who were unprepared at the start of the virus should continuously be gathering information, attempting to anticipate future impacts, and working towards understanding which parts of their business are crucial to their day-to-day operations and which are not.
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