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Risk management is an accepted practice in business activities. Risk is the possibility of loss
or injury. It is a part of everyday life for businesses and individuals. Individuals and businesses

must evaluate the risks they face, and they should minimize the costs involved with those risks.

Risk management is not simply a matter of insuring against risk. It involves, first of all,
surveying all the areas of risk to a company and then preparing a series of recommendations to

minimize potential losses from them. This is often done by risk management consultants. But some
major companies have now appointed their own risk managers.

1. Fire is still the greatest potential risk. The risk manager can simply recommend

bricking up a doorway or a hole in the wall of a warehouse to prevent fire from
spreading. Or he can suggest a safer method of stacking. On the other hand, he

can recommend installing a very expensive sprinkler system. This could save a
company huge sum in insurance premiums.

2. Industrial espionage is another, constantly increasing risk. Computer security is

particularly important, and it is absolutely vital that only authorized persons

should have access to the information stored in the computer. The risk manager
will suggest methods of selecting computer staff and restricting access to it inside

and outside working hours.

3. Working conditions are another area of risk management; even such ordinary

things as ventilation, heating and lighting are important. Those can expose a
company to personal claims from staff for damage.

4. Accident prevention and a company’s increased liability because of new

consumer protection legislation are other, obviously important areas.

5. A great many recommendations fall into the “common sense category”. Suppose

a company relies on only one supplier for a vital raw material. If that supplier
suffers a total loss of production because of a fire, strike or some other reason, the

company faces huge losses, and even more important, a permanent loss of market
share. To prevent this, the risk manager or consultant might recommend coming

to a two-way agreement with a competitor that in such a case the competitor

would supply raw materials to the assembly line. The agreement might even