All businesses are governed by compliance laws and regulations and every single business owner should include risk management as an integral part of their business operations.
Compliance is all about protecting workers, customers and the public in general, along with conducting a business in an honest and ethical manner. Risk management can interweave with compliance on some levels and proper risk management is essential for the wellbeing and longevity of any business.
With the need for both risk management and compliance to the rules and regulations governing an industry, how does it affect decisions owners and managers make regarding the business, its operation and direction?
Good Decisions Or Poor Decisions – Risk Can Play a Major Part
Nothing can really be done or achieved without there being some form of risk involved. Even taking a walk down the street can come with risks. Risk management in business isn’t about shying away from everything that could present a potential risk, but rather recognising risks and understanding what the repercussions might be should that risk come to fruition.
The type of risks a business could face will vary from business to business, but all businesses face risks on a regular basis. Making decisions in business is also something that needs to be done regularly and the outcome of those decisions is not always known when they are made. Many decisions are generally an educated guess much of the time.
Having a risk management plan will help in the decision making process, as the plan will list potential risks, what the outcome could be and ways to avoid those risks and stop them from occurring. However, being aware of these risks shouldn’t mean that decisions to move forward or expand should also be avoided. Decisions still have to be made one way or the other.
The advantage of having a good understanding of the potential risks your business could face is that you can use this knowledge to help you make the right choices, with an idea of what the consequences could be if the decision proves to be the wrong one.
Risks could include the possibility of an accident resulting in personal injury, or risks could result in a loss of production and business income. When it comes to decisions to boost business profits, there is always the possibility that your decision could ultimately prove positive or negative for the business.
Business decisions sometimes have to be made on a “pros vs cons” basis, just like other decisions in life. The pros are the potential rewards and the cons are the potential risks. If the rewards outweigh the risks, then that’s an indicator to move forward. Conversely, if risks are greater than the rewards, it should definitely give pause for thought and a change in direction might be a better idea.
Not all business decisions come with risk, but even if they do, sometimes you just have to take a chance.
How Do Compliance Regulations Affect Decision Making?
Remaining compliant with the rules and regulations that govern your industry when making business decisions isn’t so much about weighing up the pros and cons. If you’re contemplating something that goes against compliance laws, then the answer to that pending decision is not to go ahead with it.
How compliance laws will affect your decision making is you will need to make decisions that still sees your business and your employees operating within the law. When you come up with an idea, determine whether it breaches compliance or not. If it doesn’t, then you can probably move ahead with the idea.
Of course, to make decisions and remain compliant, you’ll need to be aware of what the rules and regulations are in the first place. Hiring a compliance manager or installing compliance management software can help with this.
It’s not worth taking the risk and doing something that goes against the law, as this could lead to an accident, a hefty fine, or even having your business shut down.
The Takeaway
Being aware of business risks and compliance laws will certainly play a pivotal role in the decision making process, so really it’s all about making educated choices and applying the risk vs reward ratio.
