Help Mitigate Risks by Following These Important Steps
Big or small, every business faces risks that could threaten its success.
“As ever, the accountant in me saw the risk, the entrepreneur saw the possibility. So I split the difference and kept moving forward.” -
Phil Knight, chairman emeritus of Nike
Many business owners and entrepreneurs wouldn't be where they are today if they didn’t take risks early on in their journeys. But that doesn’t mean they kept taking risks. As your business grows, so does exposure to risks and the need for a risk management plan to mitigate them.
Successful businesses find a balance between acceptable and unacceptable risk. By identifying what could go wrong, evaluating which risks should be dealt with, how to avoid the unacceptable risks and by implementing strategies to mitigate those vulnerabilities, you will be better prepared for whatever challenge that may arise.
Develop your Risk Management Plan
Developing a risk management plan helps to identify and resolve problems before they occur. Having a plan always helps you avoid impulsive reactions that can sometimes make a crisis situation even worse.
If you’re in the process of starting your plan, consider these steps to help guide you through the process:
Identify the risks
Discuss and describe risks that might affect your business with your team. Keep track of your discussion in a spreadsheet or document.
What are some of those risks?
It could be economic risk. For example we are just coming out of a period of high inflation which has had the effect of slowing down sales for many businesses.
It could be cyber risk. The news is full of breakdowns of software and computer systems. And yes, cyber criminals are a growing risk impacting small and large organizations alike.
It could be internal risk. Mistakes happen. What systems do you have in place to provide double-checks, health and safety checks, and support for you and your staff?
Analyze your list
Once you have compiled your list of risks, you can then determine the likelihood and consequence of each risk, and develop an understanding of the nature of the risk and its potential effect on your business.
Rank the risk
Evaluate or rank the risk by determining its magnitude, which is the combination of likelihood and consequence. Determine whether the risk is acceptable or whether it is serious enough to warrant treatment. Add the rankings to your spreadsheet or document.
Remember that some risks may take priority because of the requirement for due diligence. Health and safety always ranks at the top of any list of risks.
Treat the risk
During this step, assess your highest ranked risks and set out a plan to treat or modify or insure these risks to achieve acceptable risk levels. How can you minimize the probability of the negative consequences as well as enhance the opportunities?
Create risk mitigation strategies and contingency plans in this step and add them to your spreadsheet or document.
Review the Risk and Implement Mitigation Strategies
This is the step where you use your file to monitor, track and review the risks you’ve identified. Be prepared to adjust your business practices to mitigate and eliminate potential risks. Review regularly and adjust or optimize as needed.
Identifying your plan to identify risks and mitigation strategies is just the first step. Regular review with your staff and reminding them of best practices to avoid rising issues - keeping your risk management evergreen - is equally important.
Remember: risk is about uncertainty. If you put a framework around that uncertainty, then you are prepared to move much more confidently toward achieving your business goals.
If you haven’t considered risks before, there’s no better time than now! The Guildstreet team is here to help guide you through these steps and develop the right risk management plan for long term resilience and growth. Why wait? Contact us today.