Isn’t it interesting how an action like this…
is perfectly acceptable to some and not even a remote possibility to others? The same can be said for the perception of risk in business. As a business owner, you are surrounded by risk every day. How do you decide what is acceptable? How do you know what risks to focus on, and once you have a focus, how do you develop and implement a risk management plan?
The ultimate goal for risk management is to minimize the effects of change on your business.
Risks can come from positive or negative sources and can generally be controlled once you identify them.
The common negative risks associated with a small business are:
⋅Internal — weaknesses within the business that could be mitigated
⋅External factors – may be harder to control
Internal risks may be related to:
External risks might come in the form of:
However, not all risks are negative! Expansion and growth present risk, but also provide opportunity.
We strongly recommend creating a Risk Management Plan. To begin, think about your own business: what are the biggest internal and external risks? What strategies do you have in place to guard against them?
Build a risk assessment checklist as a start toward your plan. Consider these categories:
√ strategic (budget planning, business plan, strategic direction, etc.)
√ operations (continuity after disaster, IT, employees, physical plant, etc.)
√ financial (checks and balances, fraud prevention, ratios, cashflow, banking relationships/services, etc.)
√ market (customer satisfaction, growth opportunities, vendors, etc.)
For a deeper dive into risks and risk management, watch this twenty minute Northern Initiatives Small Business Resource video.
Even though running a business may feel a bit like skydiving without a parachute, understanding and planning for risk can be your safety net.