Positive Risk Management for Smaller Businesses: Safeguarding Success in a Volatile World

The stereotype that risk management is boring and risk managers are pessimistic clerks is pervasive, leading many to view it as an unloved and misunderstood discipline until disaster strikes. In today’s volatile world, however, risk management has never been more critical, especially for small- and medium-sized enterprises (SMEs) that often see it as an expensive luxury.

A recent article in Harvard Business Review proposes a more enlightened approach to risk management based on three key actions. First, it advocates for proportionate risk management, where small risks warrant small fuss, and larger risks require substantial attention. Overemphasizing minor issues can lead to inefficiencies while neglecting significant dangers can result in substantial losses.

Second, the article emphasizes the importance of celebrating success in risk management. Instead of solely focusing on past failures and losses, understanding the causes of success can be equally valuable. Recognizing and reinforcing winning behaviors can create a positive culture around risk management.

Third, positive risk management aims to protect and enhance business performance. It highlights that risk management is inseparable from performance management and that effective risk management is crucial for ambitious objectives. Growth often comes with increased risks, and only businesses with sound risk management systems can thrive.

Risk management is relevant for all types of businesses, including addressing climate-related risks and technological changes, and being proactive in monitoring and mitigating these risks is essential for long-term success.

SMEs, despite having fewer regulatory pressures, are still vulnerable to unexpected shocks. By adopting a positive outlook on risk management and fostering constructive dialogues between optimists and pessimists, businesses can strike a balance between taking risks and protecting their performance, ultimately driving steady growth without booms and busts.