There are two major types of Risk management in business, namely, Proactive risk management and Reactive Risk management. Compared to the process of risk management being driven through events, proactively implemented risk management is considered better in many ways. This is because of the fact that reactive type that responds to the results of certain incidents or factors may not be able to have effective means to manage risks in businesses.
It is always sound business policy to deal with anticipated or unanticipated difficulties prior to their occurrence. Proactive entrepreneurs tend to look out for unexpected changes and situations and plan to face adversities in advance. Proactive risk assessment offers risk mitigation possibilities for those with high business goals. It also enables business owners to take necessary precautions, help in improving all aspects of the business, and this approach ensures high success rate.
Proactive approach of risk management involves cautious analysis of a business situation in order to determine the critical risks as well as employing appropriate methods required for minimizing potential damages.
Consider, for instance, a manufacturing unit, where the supervisor or the manager might identify employees not adhering to safety measures. Rather than waiting for some hazard to take place, the proactive manager imposes stricter norms and rules. He or she introduces emergency protocols with regard to hazardous scenario—in the process, leading to better safety measure-adherence among employees. This type of proactive approach ensures decrease in accident probability while considerably bringing down the negative impacts of any such problems that do occur.
Although there are uncertainties everywhere and each one cannot be completely eliminated, risk management is one crucial process that enables businesses to successfully overcome challenges and for utilizing any technology fully. A few of the benefits of adopting proactive risk assessment are listed below:
For achieving effective and reliable risk management, business owners have to focus on proactive risk assessment approach. It helps create and enhance shareholder value, drives them ahead of competition, and allows them to face challenges that would otherwise becometough to crack.