Small business owners recognize that there’s an element of risk associated with the opportunity to pursue their professional passions. Risk factors continue to apply to many aspects of a business after the doors open. Some issues are internal (weaknesses), which can be controlled once they are identified. External risks (threats) may be beyond your control, but they can be minimized with proper foresight and planning. Northern Initiatives recommends a risk management checklist.
Internal Risk
• The Human Component:
What’s the fallback plan for illness/death of an employee family member? What steps are in place to prevent employee theft or fraud and raise morale?
• Equipment & Technology:
How would you quickly adapt to breakdowns or the need to integrate new equipment?
• Information Technology Downtime:
If credit cards can’t be processed or information is lost with no backup plan, this can slow profits.
• Operations:
What contingencies are in place for physical plant repairs, work-related injuries or managing cash flow when unexpected costs arise?
External Risk
This includes rent increases, business seasonality, competition, and market changes (decreased sale prices, increased oil/gas and vendor costs, loss of employees). There is also environmental risk such as changing laws, natural disasters and complacency among owners and employees.
Include external risk in your business plan. Assess and rank risk factors by importance and cost, and seek help from outside sources to identify risk areas.
Risk Management Checklist:
Strategic Risks:
Develop/review business plan, goals and budget.
Operations Risks:
Have a continuity plan with short- and long-term solutions, specific tasks, and staff members’ duties.
IT Systems:
Create a technology policy for user access protocols, firewalls, backups and more.
Personnel Policy:
Consider pre-employment screening, job descriptions, performance evaluations, and performance rewards.
Accounting and Cash Control:
Implement a checks and balances system that includes separation of duties, oversight of business credit card, cash payments verified by two people, etc.
If you want good cash flow stability, good credit, and longevity, start managing risk today.
