When we look at successful businesses, it can be difficult to gauge every positive contribution to their accomplishments. One certain factor, though, is the combination of unforeseen risk and the quality of risk management implemented. Poor risk management and exhaustive risk management both directly affect corporate performance, each in predictable ways.

It’s important to note that while the occurrence of risks can be uncertain, the impact of the resulting outcomes is not. These outcomes are rather predictable and you can calculate exactly how these will impact your business. As such, good risk management can effectively mitigate the negative outcomes that result from uncertainties and generate positive business outcomes. The following sections delve deeper into specific benefits that come from proper risk management.

Relate Business Objectives to Risk Management Activities

This is a flexible process. Business objectives should not be set in concrete without first evaluating the risks, and a risk assessment should not be completed without first considering business objectives. Many businesses will attempt to segregate risks into risk registers or lists but many risks are often interconnected and have different results depending on the combination, making lists ineffective. For example, the risk of internal fraud can be listed as both operational risk and compliance risk.

When relating objectives to risk management you’ll start at the top and let that fall throughout the rest of the organization. The result will be a network of risks that are sensibly tied to relevant objectives, which allows each member of the business to do their part to help make sure these objectives succeed. By considering existing risk before setting objectives, these business objectives become more realistic. In short, relating business objectives to risk management activities helps increase company awareness of these goals and increases the likelihood of them being achieved.

Facilitate Company Budgeting

A proper risk management plan involves cost planning, anticipating future costs, and prioritizing budget. Your risk assessment process will reveal the most at-risk areas of your organization and therefore clearly dictate where you need to divert resources, and how many. Budgeting includes not only financials but also time, equipment, and other resources.

This relationship reduces unforeseen costs, diminishes overhead, and keeps your organization under budget.

 Increased communication

Proper risk management not only forces different personel and departments to communicate, but that communication is focused on improving the organization and meeting goals. This is the best type of communication you can hope for. Discussion here is based on factual and current information and establishes a channel of trust. The result is a better communicating and more efficient organization.