Manufacturers are continually evolving and changing, whether it be a new product line, a new process, or the impact of external factors on your business. Due to this continual change, it could be beneficial to perform an annual risk assessment. A risk assessment is a process used to identify, evaluate, and control risks within a business.
Benefits of performing a Risk Assessment:
- Identify Risks or Threats to your Business: Performing an annual risk assessment will allow you to identify risks and/or threats to your business consistently. Once these risks are identified steps can be taken to mitigate them.
- Strengthen your Internal Controls: It is a good practice to periodically review the internal control policies and procedures in place. The reason for this is that there may be employee turnover or changes in internal control processes over time. A review of the controls you have in place will help to ensure the information entered into your system is complete and accurate. Additionally, this review can help to identify where there is a lack of segregation of duties which could result in fraud and/or theft. Performing an annual review will allow for the implementation of additional controls to reduce these risks.
- Protect Business Assets and Resources: Maintaining the security of the assets of your business, whether it be intellectual property, customer data or financial data, can be crucial to the success of your business.
- Operational Efficiencies: Identification of processes that are not running effectively could prevent future issues in your manufacturing process.
- Peace of Mind: Performing an annual risk assessment will allow you and your team to be aware of potential problems. Being proactive with implementing processes and procedures to address these concerns should give you comfort.
Examples of topics to discuss while performing a Risk Assessment:
- External Threats to the Business: These threats may include economic changes, artificial intelligence, regulatory requirements, supply chain disruptions, and other changes in the manufacturing industry.
- Internal Threats to the Business: These threats may include cybersecurity vulnerabilities, operational failures such as equipment malfunctions, internal financial fraud, and employee theft.
- Changes to the Business: These changes may include changes in employees or key positions and changes in the production process.
- Other aspects of the business that may cause concern or keep you up at night should also be considered.
Implementation:
List out the risks or threats to your business. Identify those risks that need to be addressed immediately. Then prioritize the remaining risks taking into consideration the impact of the risk, the urgency of the risk, and the likelihood of the risk occurring. Start implementing internal control processes or procedures in order of importance to mitigate, prevent, or detect the risks identified.
The reason for recommending an annual risk assessment is much can change over the course of a year. If you are continually addressing or reducing the exposure to risks and threats to your business, this should help you have a little more peace of mind.
To discuss assessing risks to your business, contact a member of HBK Manufacturing Solutions at manufacturing@hbkcpa.com or 330-758-8613.
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