Small Businesses - Manage Risk Before It Manages You
Entrepreneurs are usually risk-takers, but many do not actively manage the risks to their business which leaves it at the mercy of whatever unfortunate circumstance chooses to befall the business. The difference, in times of adversity, between surviving and thriving or watching your business go under, all comes down to one thing - Risk Management Planning.
Adversity for business comes in many shapes in sizes. It is usually sudden, unexpected and loaded with various, and often competing, threats that need to be dealt with - fast. It can be as dramatic as a car crashing into your store, or thieves holding customers hostage, or it can be as boring as a key supplier going out of business or your I.T. systems crashing.
How well you are prepared for any eventuality and the plans you put in place for the risks that face your small business will determine how resilient your business proves to be in adverse circumstances. That preparation is encapsulated in the Risk Management Plan.
Risk Management Planning is not difficult. The first thing to do is to simply identify each of the potential risks to your business and list them. Then for each rank how important each function is to the operation of your business - using a scale of 1 to 5 (1 being highly important, 5 being not important). The next step is to assess the probability of the risk happening. Using a scale of 1 to 5 (1 is highly likely and 5 not likely).
This part of the process helps you to identify and prioritise where you concentrate your efforts, limited time and resources. The next step is to develop a Risk Mitigation Strategy for each of the identified risks and then implementing them - starting with the most important and most likely to occur.
A client of mine, is in the adventure trekking game, taking his intrepid travellers to walk some of the world's most remote and dangerous mountains. Realising the risk to his clients and his business, I advised him to implement plans to minimise the risks to his clients' lives while on these wild adventures - because any loss of life would be a serious threat to his ongoing business viability.
His risk mitigation plan now includes pre-trek fitness training, mandatory medical screening with a Doctor's certification that the trekker is considered healthy enough for the walk, advice on immunisation, a trekking program that caters to the consideration of their ongoing health, as well as satellite phone and helicopter evacuation plans and the insurance to cover these events. It also covers the media communication strategy and legal advice on retainer for advice on a case, by case basis. Despite the best laid plans, he has had a few client's evacuated with injuries and sickness - and yet, his business continues to survive and thrive.
Now the average business may not need to cover such dramatic events, but this does highlight how being prepared for the worst case scenario and implementing well thought out risk mitigation plans results in the ongoing viability of this small business.