Running a business can be a dangerous occupation with many different types of risk. Some of these potential hazards can destroy a business, its name or brand while others can cause serious damage that can be costly and time consuming to repair. Despite the risks implicit in doing business, CEOs and/or risk management officers – no matter the size of the business, from small to corporate giant – can prepare for them if they know what they are.
If and when risk becomes reality, a well-prepared business can moderate the risk’s impact. Dollar losses, funds diversion, lost time and productivity and the negative impact on customers can all be minimized.
There are four Major types of Risk which affects businesses in Nigeria.
Physical Risks
Physical risks are the most common type. This encompasses Fire, Natural Disasters like flood etc. To manage this risk, it is important we train our employees on the need to be cautious in their daily activities as it affects the business they work for. Some people don’t take the smallest precaution in their daily activities. Electrical appliances aren’t switched off when not in use, taps are not locked after use, windows and doors are not properly locked. Fire prevention systems and apparatus are not checked on a regular. It’s a tough one especially when most physical risks are supposed to be prevented. Safety takes priority over everything else. People who work with dangerous materials, should be properly equipped and trained to handle these materials safely.
A plan should be created and implemented to handle the immediate effects of these risks. Government agencies and local Emergency Agencies should help in acquiring information to prevent these accidents and provide advice on how to control them and minimize their damage if they occur.
Human Risks
Greed, love for money and unethical activities are major Human risks to every Business. Employees suffering from these conditions should be urged to seek counseling and have a rethink if necessary. Protecting against embezzlement, theft and fraud may be difficult, but these are crimes which occur frequently in the workplace. A system of double signature requirements for cheques and invoices and payables verification can help prevent embezzlement and fraud. Payment delays and diversion of funds can pose a serious threat to a Business. When people do this, they might get away with it temporarily but on the long run the effect always come creeping back and dealing a serious blow to the Business. Stringent accounting procedures may discover embezzlement or fraud. Thorough check before hiring personnel or bringing in a partner to prevent the loss that might occur. While this may not necessarily be grounds for declining to hire an applicant, placement for the new hire in a critical position in which money and cash equivalents are used may not be judicious.
Most Nigerian Businesses are one man propelled. They can’t function or run when the owners are not there. It makes it hard for the Business to grow and easier for the Business to die.
Sickness among the work force is inevitable and is always a problem. To prevent loss of productivity, assign and train backup personnel to handle the work of critical employees when they are absent due to illness
Technology Risks
Power outage and system failure is perhaps the most common of technology risks. Alternative power sources are good back-up system to provide electrical energy for lighting and other functions until utility power is restored. Computers may be kept up and running with high-performance back-up batteries. Power surges may occur during a lighting storm, or randomly, so computer systems should be furnished with surge-protection devices to avoid loss of documents and destruction of equipment. Offline and online data back-up systems should be used to protect critical documents.
Although telecommunications failure is relatively common, risk managers always advice business owners to provide gsm phones to personnel whose use of the phone is critical to their business.
Prioritizing Risk
After the risks have been identified, they must be prioritized in accordance with your assessment of their probability.
Establish a probability scale for purposes of risk assessment. For example, risks may be:
1. Very likely to occur
2. Some chance of occurrence
3. Small chance of occurrence
4. Very little chance of occurrence
Other risks must be prioritized and managed in accordance to their probability of occurring. Statistical analysis of the probability of any risk occurring, and the potential financial damage ensuing from the occurrence of those risks – may be accessed and can provide guidance in prioritizing risk.
Managing Risk
Insurance is a principle safeguard in managing risk, and many risks are insurable. But in Nigeria most of our Businesses are insured, making it hard for them to survive after a hit. And we also operate in a high risk environment. Some risks are inarguably high priority, such as the risk of fraud or embezzlement if employees handle money or perform accounting duties in accounts payable and receivable. Specialized insurance companies will underwrite a cash bond to provide financial coverage in the event of embezzlement, theft or fraud.
When insuring against potential risks, never assume a best-case scenario. Even if employees have worked for years with no problems and their service has been exemplary, insurance against employee error may be a necessity. The extent of insurance coverage against injury will depend on the nature of your business.
Finally, hiring a risk management consultant may be a prudent step in the prevention and management of risks.
Prevention
The best risk insurance is prevention. Preventing the many risks from occurring in your business is best achieved through employee training, background checks, safety checks, equipment maintenance, and maintenance of the physical premises. A single, accountable staff member with managerial authority should be appointed to handle risk management responsibilities. A risk management committee may also be formed with members assigned specific tasks, with a requirement to report to the risk manager.
Business owners shouldn’t cut cost, you should learn to work within a certain area, and build trust amongst your team so as to build a relationship and foresee a possibility of something happening before it happens. A periodic, stringent review of all potential risks should be conducted. Any problems should be immediately addressed.
Conclusion
With over seven years’ experience in the Banking and Oil & Gas spanning through Assurance Bank Plc, Guarantee Trust Bank, Caades Oil and Gas ltd, and almost eight years’ experience in running of private Business in Nigeria, I have come to learn that whilst business risks are abound, and their consequences can be destructive, there are ways and means to insure against them, to prevent them and to minimize their damage if and when they occur. Finally, hiring a risk management consultant may be a prudent step in the prevention and management of risks

Chibueze Ojeh
MD Bipolar Oceanlink Peteum Ltd