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The (oh so worth it) cost of risk management
Nothing worth doing and no business worth investing in come without a certain level of risk. Managing your company’s risk is imperative to operating your business. Risk management means identifying, assessing and controlling risk to your assets. The balance of efficient risk management is key to business success and with AMREP as your partner, you can be assured the efficient management of risk and control is in safe hands.
Risk management in the Australian economy
Risk management is more than just health and safety. Businesses are exposed to productivity, governance, compliance, cost, environmental, reputational, and business interruption risks to name a few. Businesses are required to understand their risks and ensure that where risks’ consequences exceed their risk tolerance they develop effective controls to manage those risks.
At the forefront of most businesses is the requirement to manage the risks to the health and safety of their people, and those who could be affected by risk events. It takes a detailed and structured approach to identify, assess, manage and control these risks, and to then ensure they remain effective. AMREP has developed a structured approach to the identification and assessment of business risks and the development of risk-based controls to manage those risks.
Risk management is at the forefront of most businesses these days. For example, when it comes to Workplace Health and Safety, many office spaces and worksites openly and clearly display specific rules and practices at their entry points for all to see. Workplace Health and Safety legislation covers all jurisdictions across Australia and is designed to ensure the lowest level of risk exposure for workers and those at risk from work being undertaken.
There is a significant drive to keep Australian workers safe and free from harm, thanks to state-based legislation and regulations, codes of practice, compensation and insurance schemes, licensing and registrations, inspectorate teams and an extensive list of tools and resources available to ensure and improve safe working standards. Navigating WHS legislation is complex and can be time-consuming and difficult. The intent is generally clear in that the law aims to reduce risk exposure to Australian workers and those affected by works being undertaken.
Workplace Health and Safety requirements are commonplace. All businesses have an obligation to ensure their employees and those affected by their activities are safe from harmful events and circumstances.
The WHS Act (s3) is designed to protect the health and safety of workers and people while empowering them and their support agencies to enact measures.
Mitigated savings are simply defined as the costs not incurred because of an action taken. Because mitigated savings are generally theoretical, it is difficult to sometimes convince others of the requirement to complete or fund an action. In general, these savings are a reduction in risk, not exclusively safety but can also include business, commercial, legal, environmental or other costs. Postponing maintenance and inspection tasks can reduce cost, but this comes at the expense of added risk. There are many ways to assess the risk and make an educated decision balancing the cost to risk ratio.
Risk reduction as a worthy investment
Risk reduction generally comes at a cost. Completing a risk assessment requires time, making physical changes can have a resource cost and impact on production. Risk can be defined as the combination of the likelihood and consequence of a hazard eventuating, which can relate to the safety of people, business risk including commercial and legal, environmental risk, community effects and other potential impacts.
The Corporations Act requires listed businesses to share with shareholders material risks that could affect share value.
Where a material risk is present, a business needs to either mitigate the risk or explain to shareholders the reason for carrying the risk. In a private company, shareholders bear the risk to the share value, and although not managed specifically by legislation, it is good practice for the business to understand its liability.
Reduction of risk can be a single large hazard event or the cumulative effect of smaller hazards. Equally, the reduction of risk relative to the resources committed provides a theoretical improvement. The challenge is to relate this risk reduction cost to the addition of business value.
How do you do that? There are many methods that can be tailored to suit the scale, nature and any other specifics of the business in review. Understanding how resource allocation relative to the risk reduction makes a real difference allows for better communication of risk reducing activities, the need for preventative maintenance and inspection strategies and the alignment of thought from the persons in the business.
Place your risk management in the hands of experts
At AMREP, we understand the intricacies of successful risk management. We deliver a superior level of expertise and a full suite of competencies in risk engineering solutions. Contact our team and experience the AMREP difference.