Why does one want to identify risks and plan for it in business? Simply put, to ensure that the business survives. We want to identify risks, plan to prevent them and, if not possible, to manage and mitigate them so that we can head off disaster.
Yet risk management is often seen as a complex exercise and one that is relegated to a later date, when there is time. Risk management is, in fact, neither difficult nor a scientific process. It is a logical process that is easily done.
With your team, start by listing all the possible disaster scenarios applicable to your business that you can think of. All of them. Even the seemingly unlikely ones. In this modern age, we all assume that being without electricity for a week is a ludicrous thought and highly unlikely. Yet, it does happen. The same with natural disasters – we tend to think it will only happen to others, until it hits our backyard.
Your risk list will likely include some of these:
- Loss of electricity
- Flood damage
- Supplier issues
- Transport issues
But let’s concentrate on your core business for a moment:
- What product or service does your business provide?
- Who are you dependent on to supply or provide that product or service?
- How do your products get to your premises?
- How do these products move from your premises to that of your customers?
- How are you going to grow and protect your customer base?
- How are you going to grow and protect your product line/services?
- What are the risks to your core business with respect to product market share dependency?
- What are your currency fluctuation risks?
- What are your warranty/guarantee risks?
- How do you get your product or service out to the market?
- Is your supply line able to cope with demand?
- Is there a risk of missing opportunities because the market is not aware of your product or service?
As you can see, it isn’t just natural disasters that one has to think about when it comes to business.
Let’s pick one possible risk scenario and drill down.
RISK: If your business relies on the sale of a product that needs to be installed or delivered, what are the delivery/installation risks?
Now start looking at it from all sides to find the controls to catch things before they fall apart.
CONTROLS: How will you know when there is a delivery/installation risk?
Now you can start managing this risk by creating mitigating actions.
MITIGATION: First, what can you do to prevent it from happening? Second, if it does happen, how do you manage it to ensure the least impact on the business and the customer?
- What training does your team require to avoid the installation risks? And
- What should the installation manual include?
As you can see, it is a linear process, starting at one side (being the risk) and then thinking it through (to how do you prevent it or lessen the impact).
You know your business. You know what needs to be done. Spend some time on developing your risk management plan by creating a mitigation plan for every one of the risks that you have identified. Then communicate it to everyone involved.
As with any plan, a risk management plan is also no good unless documented and communicated. Give this priority because what you are buying is not just peace of mind. You are potentially buying the survival of your business.