How to manage risk in business: 7 monitoring techniques

How to manage risk in business: 7 monitoring techniques

A crucial part of our role at Naismiths is to act as the first line of defense to protect the financial interests of funders when financing construction projects, which includes support with risk management. Our experienced teams employ rigorous project monitoring, open communication, risk assessments and real-time reactivity to mitigate risks and potentially harmful unforeseen circumstances. We safeguard our clients’ commercial interests and deliver detailed reports, comprehensive audits and technical analysis at every stage. 

A comprehensive risk assessment will account for technical, compliance, financial, operational and strategic risks.  The key to risk management is the ability to be flexible and agile in your response, this is because it isn’t possible to mitigate all risk. Each project will have unique internal and external influences, which must be managed. However, there are also surprising benefits to risk management, namely the definition of clear goals, informed decision making, an improved success rate and a way of working that encourages innovative solutions to potential problems.  

5 key steps of risk management 

1. Identify your risks 

The first step in any risk management plan is to consult industry experts and identify the project risks. By looking at the sector, regulations and even external influences such as inflation, labour and materials shortages, this can help to stress test a project and look at all eventualities to ensure funders can make informed decisions. This due diligence can be done in a variety of different ways, but increasingly professionals are moving to the benefits of a digital analytics approach.  

2. Analyse your risks 

Once identified, understanding the risks and the potential impact is the next step in the due diligence process. All the factors that can be quantified are analysed so that the risks can then be weighed up, categorised and dealt with in priority order. 

3. Evaluate your potential actions 

Reviewing a variety of responses to a risk involves considering the impact on the project and how much of a priority it is when compared to the time and financial implications of the possible solution. 

4. Respond to the risk 

Although a project can’t be protected from every possible risk, knowing how to respond to eliminate, avoid or mitigate any risk is essential. A well-informed action plan could avoid disastrous consequences.  

5. Monitor results and identify learning points 

Understanding how projects can be navigated to ensure the best results is often a learning process. This is why monitoring experts ensure that extensive sector and project knowledge is applied to schemes throughout the monitoring process. It is this knowledge that can lead to better project decisions and predict future risk factors.  

Read on to discover 7 crucial practices to manage risk successfully.  

7 key steps to managing risk in business 

1. Learn from past situations 

Taking points for improvement from either past situations in your own company or similar events within your sector could save precious time and resources. Our project monitoring team will help you to create plans from your risk management results and identify where teams can be flexible to deal with changes along the way. 

2. Research market trends 

Similarly to learning from previous company events, looking at market trends can yield valuable insights into how scenarios may play out. It can also inform whether the best course of action might be to wait for industry stability.  

3. Plan for the worst 

It’s impossible to plan for every possible outcome, but laying out plans for the worst-case scenario can take some of the stress out of unexpected and aid quickfire decision making under pressure.  

4. Communicate 

Staying engaged with your teams across different levels, your customers and suppliers will help to avoid unexpected scenarios. Avoid having teams that work completely independently and hold regular forums and business updates with opportunities for managers to feed in and cement the business goals and strategy. 

5. Manage the controllable factors 

Staying on top of your own company data, monitoring market trends, regulator updates and analysing successes and failures is a surefire way to monitor and manage potential risks. Although there are inevitably elements outside of our control, being familiar with the ins and outs of your business contributes to an ability to foresee challenges.  

6. Stress test scenarios 

Part of identifying and evaluating risks could include mapping out the impact and stress testing parts of the project to discover where changes need to be made. Stress testing in this way can reveal hidden vulnerabilities you might not have been previously aware of.  

7. Develop a risk management plan 

Creating a risk management plan with the aid of an independent monitoring team, dedicated to mapping out possible risks, is a worthwhile investment. Integrating risk management and project monitoring into your overall strategy will help to prevent threats impacting your project investment.   

Contact our risk management specialists 

Get in touch with our specialist team today to discuss your risk management needs. Our chartered surveying, project monitoring, insolvency and restructuring services all feature real-time and reactive risk management and expert advice from a professional and pragmatic team.