I happened to be attending the Money Show recently and I realised that, despite being far from a financial genius, I understood the language everyone was talking. They were talking about one of my favourite subjects – risk!
In the financial markets the aim is to get rewards and the higher the rewards, the bigger the risks. However, traders and experienced investors don’t just keep their fingers crossed and go for it; they have a process – and the more I listened, the more I realised that this was my language. It’s the same process used in managing all kinds of risks, including occupational safety, environmental and reputational risks.
They talked about:
• Identifying the hazards – getting information from the markets so you have a thorough knowledge about what you’re investing in. In our business it’s exactly the same process; it’s about taking an informed approach to the type of hazard and understanding the issues involved in that particular set of circumstances.
• Evaluating the risk – examining how much and when an investment is likely to grow or drop in value and checking out your exposure. Just like the financial markets, you need to determine the likelihood and severity of the risk, but, just like the financial markets, you can rarely eliminate it altogether.
• Establishing controls – I heard people on various stands talking about different sorts of control, such as options to enable them to sell their shares back into the market place at some future time at a pre-arranged price. This is the equivalent to transferring risk to an insurance company. There are other ways of mitigating risk, in the finance world such as the use of stop/loss controls, which, like personal protective equipment, are a last resource measure, if everything else fails.
• Recording the significant findings – in the financial world they record performance to track how their investments are doing. In the business world employers and premises managers record their procedures and the outcomes of their evaluations (i.e. risk assessments) to prove they have reduced risk, as far as is reasonably practicable and also to identify instances where things have gone wrong so they learn from these and prevent them happening again.
• Monitoring and review – investors and traders are forever re-evaluating their investments; they don’t just buy and then forget about it. Keen investors watch the various indices and charts like a hawk to see how their investment is doing, making regular and frequent decisions about how to improve their position. Ideally, this is also what businesses should be doing in relation to occupational and environmental risk etc., as circumstances change – some do – but many don’t. They forget to carry out ongoing monitoring and only review when their assessments are out of date, or approaching their formal review date.
Financial risk is just one element of business or organisational control. Most business owners and principal managers are very aware of their financial situation – it’s expected of an entrepreneur, especially one who is growing a successful business. The same processes apply to occupational risk and safety – you can’t eliminate all risks, but you can invest in a safer way of protecting both your people and your profits!