How Risk Control Works

Modern businesses face a diverse collection of obstacles, competitors, and potential dangers. Risk control is a plan-based business strategy that aims to identify, assess, and prepare for any dangers, hazards, and other potentials for disaster—both physical and figurative—that may interfere with an organization's operations and objectives. The core concepts of risk control include:

·         Avoidance is the best method of loss control. For example, after discovering that a chemical used in manufacturing a company’s goods is dangerous for the workers, a factory owner finds a safe substitute chemical to protect the workers’ health.

Example of Risk Control

As part of Sumitomo Electric’s risk management efforts, the company developed business continuity plans (BCPs) in fiscal 2008 as a means of ensuring that core business activities could continue in the event of a disaster. The BCPs played a role in responding to issues caused by the Great East Japan earthquake that occurred in March 2011. Because the quake caused massive damage on an unprecedented scale, far surpassing the damage assumed in the BCPs, some areas of the plans did not reach their goals.

Based on lessons learned from the company’s response to the earthquake, executives continue promoting practical drills and training programs, confirming the effectiveness of the plans and improving them as needed. In addition, Sumitomo continues setting up a system for coping with risks such as outbreaks of infectious diseases, including the pandemic influenza virus.