Business operations - like life in general - inevitably involve risks. There’s no need to fear them, especially if something is done about them. Risk management is one of the key benefits of corporate responsibility work for companies, and its importance should not be underestimated. Risk management is a vital tool in all business operations.
From a company’s perspective, a risk refers to the possibility that something may occur which could harm or even threaten its operations. Risks introduce uncertainty into the business and hinder the achievement of objectives. Through risk management, we aim to identify and control such factors and events.
So what does this mean in practice? At its simplest, risk management is about making smart choices. A company selects the machinery and equipment it needs from trusted and well-established suppliers. It chooses partners known to be reliable. It stays informed about the regulatory requirements relevant to its operations—and complies with them. By following these examples, a company has already taken the first important steps in effective risk management.
One of the cornerstones of corporate responsibility—active stakeholder engagement—is also a crucial part of risk management. By maintaining active interaction with its stakeholders - such as customers, subcontractors, suppliers, and financiers - a company gains valuable insight into their attitudes, expectations, and wishes regarding the company and its operations. By listening closely, the company can also detect weak signals and emerging risks that might otherwise go unnoticed. This makes it easier to steer business development in the right direction.
By listening closely, the company can also detect weak signals and emerging risks that might otherwise go unnoticed.
Active engagement with stakeholders also helps a company protect itself from reputational risk. This is especially important, as reputation is known to have a significant impact on a company’s success. And because reputation is primarily built on the relationship between the company and its stakeholders, well-managed stakeholder relations and a strong reputation help the company withstand even minor setbacks more effectively.
Subcontractors and partners present their own challenges for risk management, as their actions can, in the worst case, negatively affect the reputation of the principal company. However, this too can be managed through active stakeholder engagement—that is, by maintaining open dialogue with actors in the value chain and staying informed about their activities. As previously mentioned, making wise choices about who the company works with also plays a key role in mitigating these risks.
Risk management brings safety and stability to the entire business. Employees feel more secure and confident, and the quality and efficiency of operations improve. Being prepared reduces the number and cost of unexpected incidents. Resources can be allocated more effectively when the company has a better understanding of its own operations. In the end, the company’s reputation and customer satisfaction also improve.
In a company engaged in corporate responsibility and operating responsibly, risk management is an integral part of everyday processes. Employees who are cared for and listened to perform their work well and with care. Open and transparent communication, along with strong stakeholder relationships, supports the flow of information between the company and its stakeholders—and creates opportunities to develop the business in the right direction. Stakeholders value companies that act responsibly. Furthermore, responsibility enhances a company’s competitiveness and increases interest in the company. All of this is also good risk management.
Risk management as a tool for corporate responsibility. Key points summarized on one slide.
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