Tip: Consider the 'Crazy' in Risk Management - Modern Distribution Management

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Tip: Consider the ‘Crazy’ in Risk Management

The risks we don't think about often disrupt business most.

Often it's the risks we don't think about that are likely to disrupt business most. Basing a risk management system on things that have already happened doesn't prepare you for scenarios that haven't happened yet, according to Vernon Grose, author of Managing Risk: Systematic Loss Prevention for Executives and founder of Omega Systems Group Inc., in the MDM Interview Minimizing Risk in Your Business. "Risk scenarios just have to pass Murphy’s Law – can they really happen, even though they may be really rare or crazy or odd?" he says.

Including anything that could happen introduces foresight into the planning and allows companies to prepare for those unusual events.

Begin by building a functional model of your business, Grose says. "Companies have to be able to define what set them up in business, what will keep them in business and what they do functionally."

Use that model to identify areas where things could go wrong – even if it has never happened. Many of the common risks "could be fixed for a dime," but rarer events could "cost $100 million to fix," Grose says.

"There’s never enough money to control or eliminate all identified risks, so there has to be a means of making it as cost-effective as possible," he says.

Read more about why distributors should identify, rank & manage potential risk in the MDM Interview Minimizing Risk in Your Business.

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