Thomas M. Bragg on Business Risk Management

If you will allow me to indulge, I’d like to depart a bit from my focus on business risk management. Risk management isn’t limited to business. What types of risk do you face in your personal life? In November I wrote a post titled “3 Categories of Risk“. I should have been a little more specific. In that post I was talking about categories of business risk. But what about personal risk? Here are some general categories that come to mind, in no particular order…

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Relationship Risk

Life is full of relationships – family, friends, co-workers, acquaintances, service providers, etc. Every one of us manages these relationships on a daily basis. Humans are social creatures whose existence depends on relationships. I can’t think of any risk more important than relationship risk. I doubt that many of us consciously consider our relationships and take specific steps to manage our risks. Should we?

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Liability Risk

We all face potential liabilities. Some are covered by typical insurance – homeowner’s/renter’s insurance and auto insurance will cover someone’s medical costs if they are injured on or by our property. But there are other types of potential liabilities. In today’s hyper-connected world, libel and slander are easier to commit than ever. Identity theft can create huge personal liabilities. What are you doing to manage the other less-known potential liabilities? Granted, there is a big overlap here with financial risk, but I think it deserves its own category. Does personal reputation risk fall in this category?

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Safety Risk

I don’t have to tell parents about safety risk. From the time our kids start to crawl, we are chasing them around to protect them from all the hazards in the world. We manage our own personal safety risks with seat belts, airbags, helmets and pads. Security companies produce TV ads reminding us that bad people might break into our houses and threaten us and our families. Smoke alarms, airline safety briefings and evacuation plans have become taken for granted. Does that mean we’re ready when they’re needed?

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Property Risk

We all own property and face risks because of it. There are risks that someone might steal it. Or there are risks that it might be damaged or destroyed. Again, typical insurance will cover some of the risk for your biggest properties, but have you considered some of the smaller properties? Think about your family photos. Do you have any heirlooms or items with sentimental value. How are your managing the risk of their loss, damage or destruction?

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Financial/Investment Risk

I probably don’t have to write much about this one. Most of us experienced a financial loss of some sort during the last year’s recession. Times were good there for a while and a lot of people got lax in managing their financial risks. The recession was a big bucket of cold water reminding us that we’ll pay the price if we’re not paying attention. Do you really need me to say anything more?

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Health Risk

Health risk is related to safety risk, but it’s different. People are becoming more aware of taking care of themselves and better managing their health risks. If you’re in the U.S. you can’t help hearing about the health care debates in the U.S. congress. Health risk management is big business and a very sensitive topic for many people. Do you think about managing your health risks on a daily basis?

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Employment Risk

During the last year, the U.S. unemployment rate doubled. Very few of us can consider our jobs completely safe. Do you think about what you would do if you were laid off or if your business wasn’t profitable anymore? Do you have specific plans? Is this risk the same as financial risk? I would suggest not. Most people get much more from a job than just a paycheck.

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Environmental Risk

I’ll be honest. This one was almost an afterthought for me, but it needs to be included. Whatever your thoughts are about global warming, going “green”, and tree huggers, it’s hard to argue that there is not environmental risk facing us. It may be on a micro-scale – mold in your house or a contaminated well. Or it may be on a macro-scale – melting glaciers and a depleted ozone layer. Wherever you want to look, we face environmental risk. How are you addressing environmental risk, either micro or macro?

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As I paused in writing this, it occurred to me that there are personal opportunities as well. How do we manage those? I’ll save that one for a future post. It seems to me that managing personal risks and opportunities is similar but very different from managing business risks. It’s an interesting topic that I want to come back to. What do you think? Can personal risks be managed in the same way as business risks? Are there other personal risk categories that I missed? I look forward to your thoughts…