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  • Writer's pictureHale Portfolio

Risky business

Hands up who saw the pandemic coming? Hands up who was prepared to switch to working from home, deal with supply chain disruption, staff shortages, and the multitude of other challenges that businesses have faced over the last year? I must admit my own hand is not raised.

A pandemic is just one risk of many that all companies will face on a day-to-day basis and every business is subject to possible losses from unmanaged risks. Indeed, some risks are so severe that they could cause a business to fail.

As such, I believe that every business, regardless of size, should have a risk assessment plan in place. This is where a business identifies possible risks or problems before they happen and establishes procedures to mitigate or eliminate potential issues.

Sounds time-consuming, why would I bother?

Sound risk management should reduce the chance that a particular event will take place and if it does take place, reduce its impact. It helps you identify potential problems that could undermine business objectives and helps protect your staff, stabilises your operations, and safeguards valuable assets. It also helps employees understand the importance of processes and appreciate why such approaches exist.

How to create a risk management plan for your business

1. Identify your risks

The list of risks is endless, and it will vary significantly from company to company. Examples could include:

  • operational (machinery breaking, disruption to supplies, issues with distribution, etc)

  • human (health and safety, loss of a key individual, employee fraud, human error, etc) e

  • economic (market instability, economic downturns, exchange rates)

  • compliance (legislation and regulation, both mandatory and voluntary)

  • technological (systems being hacked, power outages, etc)

  • financial (credit issues, changes in financial regulations, interest rate changes, etc)

  • political (changes in tax, policy, foreign influence, etc)

  • natural (weather, natural disasters, pandemics, etc)

  • reputational (bad press, loss of customer confidence, product recalls, etc. Social media is a catalyst for this type of risk)

It is imperative to include people from across the business at this stage to ensure you gain a true understanding of the risks your business is exposed to.

2. Assess the risk

This is where you identify the probability of risks happening versus the impact such risks would have on your business. For this step, I would recommend using a risk matrix as they provide a clear visualisation and help businesses identify where they should direct their focus. There is a useful free tool available here to help you with this.

3. Manage your risks

So now you know your businesses’ main risks, what do you do next? There are essentially 4 choices -

  • Avoid the risk – for example, not proceed with a project if it is deemed the risk outweighs the benefits, replace equipment, update your processes, etc.

  • Share the risk – for example, taking out insurance or outsourcing to cloud service providers, payment processors, etc.

  • Control the risk – what can you do to mitigate the risk? For example, invest in firewall protection, health and safety training for staff, update your compliance processes, maintain equipment, etc.

  • Accept the risk – there will be some risks where you have no choice but to accept them and the cost of mitigating the risk is not worth the potential threat of the risk.

4. Monitor and review

You need to make sure you regularly monitor and review your risk management plan. As I advocate with business plans, they need to be working, live documents used to drive business decisions and they should not sit on a shelf gathering dust! Communicate your plan widely and ensure it permeates your organisation.

Whilst none of us have a crystal ball to look into the future, having a risk management plan will help provide peace of mind to business owners, knowing that systems are in place to keep your business safe.

If you are an SME owner and would like advice on areas of risk that your business may be exposed to and help with implementing appropriate processes, then please contact me.

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