Bringing risk management into the business is like hiring an organizer to clean up the office. Before long, elements of the business are decluttered, providing a clearer picture of the operation. This creates a greater awareness of how obligations of all shapes and sizes can be managed in a more stable, secure way. The result? A stronger business.

Schedules, reviews, filing deadlines, and other key dates often get lost in the hustle and bustle of daily business. A risk management plan will turn these into priority items, resulting in fewer missed deadlines and overlooked requirements, thereby minimizing the risk of being fined, failing to apply for appropriate licenses, and so on.

It is crucial to reduce the consequences of failed financial obligations. If a company misses just one critical financial obligation, the doors can literally close next month—or tomorrow. If you don’t make payroll or delay payment, for example, employees may walk. If you don’t make a credit payment, banks may call the loan. A bond call can shut down a company within a couple of weeks—that’s what happened to Enron. A market call has the same impact, since all trading with the company will be suspended. When you can’t pay a supplier, it won’t be long before that supplier stops shipping critical material to you.

A well-managed business that knows its current and potential short- and long-term risks and acts upon them is less likely to sit on either side of the litigation fence. Disputes between the company and suppliers, customers, regulators, and other authorities will be reduced. And when disputes do arise, you’ll have clear, well-organized documentation to back up your company’s claim. The expensive, reputation-threatening decision to litigate can be replaced by mitigating the situation.

With fewer and smaller incidents comes a perceived increase in company safety and reliability by the insurance industry. Consequently, managing risk well often leads directly to lower insurance costs.

Risky situations almost always slow down company processes. They can mean interrupting a sales manager for three critical selling hours or shutting down an assembly line because a financially strapped supplier sent watered-down materials to stretch their inventory.

The key to risk management is to build just enough measures and systems into place so that, ideally, nothing will shut down or be interrupted. Every time an incident occurs that takes an employee or employees away from their jobs, causes a delay in production, or makes it impossible to supply a new product, time and the opportunity to sell are lost to the business. The company loses money in two ways: from the lost wages of employees who had to deal with the situation and from lost potential sales.

The less these incidents occur, and the faster normal operations resume, the better the company’s position.