Do you take risks with your business? Of course you do. Without risk, there can be no reward. But it pays to be aware of those risks, and to manage them.
In the wider business community, risk management has become a hot topic, with new risks emerging all the time, and ever more sophisticated techniques to identify, measure and manage every risk you can possibly imagine (and some you can’t!)
The Institute of Risk Management (the leading UK body for risk management) says:
“The risk landscape and expectations on risk departments have changed beyond recognition over the past ten years. Rapid globalisation, spreading communication networks, and technological and demographic changes have added huge layers of complexity to the types of risk organisations face, and the speed at which those risks can arise.”
In a recent poll of small business owners, most people said the thing that kept them awake at night was juggling too many balls. This is as big a risk as anything else. You may drop one of those balls and lose a client, miss a payment deadline, or fail to back up your data just before your laptop dies!
Most small businesses don’t need a complicated risk management process, but a disciplined approach to looking at risk can really help. I believe that this should contain 5 key steps:
1. Identify your risks
Think about the different aspects of your business, for example: clients, suppliers, staff, technology, processes, finances, competitors. In each area, identify what might go wrong. Be as wild and whacky as you can – think the impossible!
- What if the dog knocked a vase of water all over your desk?
- What if a freak storm cut off the power to your house / office for 24 hours?
- What if your best client disappeared overnight?
2. Quantify your risks
How significant is each risk? Consider the likelihood of it happening, and the impact on your business if it did. If the likelihood or impact are low, you probably don’t need to worry. If it’s higher, you need to take action.
- If the dog did knock over that water, there’d be a big mess, but once you’d cleared that up, what would the possible damage be – to documents, hardware and software?
- If you had no electricity, gas or (probably most important) no wifi, what would be spoilt or delayed?
- If your best client vanished, how big a hole would that leave in your finances ?
3. Control your risks
How can you reduce or eliminate the possibility of your significant risks happening? One option to consider is insurance, but there may be simple steps you can take as an alternative.
- if losing all your data would be a disaster, is it backed up regularly AND stored offsite (in the cloud or on an external drive held in another location)?
- If losing a key member of staff would be awful because of the knowledge they carry around, how can you get them to share that knowledge with others either verbally or in writing?
- If losing your best client would be catastrophic, how can you build your pipeline to get a better spread of clients?
4. Take action!
Knowing how to control your risks is one thing, but unless you actually take the steps you’ve identified, nothing will change.
5. Review your risks regularly
Your business, and the environment it operates in, is constantly evolving. You need to look at your risks at least once a year to keep them under control.
I spent many years helping Boards with risk management, and was a member of the Institute of Risk Management. So if you want to manage the risks in your business, I can help.
My workshop ‘Managing Risks – made simpler” is designed specifically to help small business owners address the risks in their business in a practical, non-threatening and fun way. Visit my workshops page to find out more about this and other workshops.
Alternatively I can support you on a 1:1 basis to carry out a risk assessment for your business. Get in touch to find out more.