Your Business and Risk Management Planning
Being aware of the types of risks a business may face and how to best manage those risks, is a crucial part of running a successful business.
While the nature of risks is such that they can often be unpredictable in terms of when they will occur, having a concrete plan in place as to how to handle risks when they arise can mean the difference between your business surviving a tough period and folding as a result of a tough period. Such plans are typically referred to as ‘risk management plans’.
Let’s have a look at risk management plans – the types of risks they are designed to manage, what they involve and how to go about creating one – in further detail.
What types of risks are we talking about here?
While business can be potentially exposed to all types of risks, we’ll just focus on the most common ones likely to affect small businesses such as yours.
Risks to small businesses include, but are obviously not limited to, the following:
- Injuries in the workplace
- Loss of customers or downturn in trade
- Your product or service being superseded or becoming obsolete (often due to advances in technology)
- Staff turnover
- Employee fraud
- Increases in interest rates and inflation
- Natural disasters (earthquakes, fires, floods, storms, cyclones, etc)
- Terrorist activity.
How will a risk management plan help me to manage these risks?
It might be easy to dismiss the idea of risk management planning as irrelevant to your business if your business is relatively small in nature, but the reality is that small businesses are just as much at risk as larger enterprises – in fact, small businesses, due to smaller profits and resources, are typically not as well equipped as larger businesses to handle the impacts of risks when they arise.
Risk management planning is all about identifying, assessing, monitoring and reducing the impact of risks. When you go through the process of implementing a risk management plan, the benefits can actually be quite substantial. Such benefits can include:
- Uncovering risk blind spots (i.e. identifying the types of things that are already affecting your business from performing at its best capacity)
- Noting behaviours and practices within your business that are not consistent with OHS standards and that have the potential to cause harm to you and your employees
- Noting behaviours and practices that aren’t necessarily wrong, but that could be improved for better outcomes and to lower the risk of poor outcomes
- Helping to identify areas where costs could be minimised
- Making you aware of potential risks you may not have considered and implementing a plan of action should they occur
- Determining the steps the business would take in the case of a sudden event where the potential for widespread impact is high (for example, in the case of a natural disaster)
- Ensuring your business is financially equipped to withstand the impact of a whole range of different risks
- Having an easily accessible plan to look to in the event of a whole range of different risks so you and your employees are not confused about how to handle a situation – ensuring a cohesive approach.
As always, planning is a big part of success, so when it comes to risk, whether or not you have an effective plan in place for handling such risk could be a big factor in determining the success or failure of your business when the worst happens.
How do I go about creating a risk management plan?
The list of steps required to implement a successful risk management plan is actually not that long; rather, it’s the scope required for each of the steps that can often be quite daunting.
In terms of the process of creating a risk management plan, it’s quite simple and straightforward:
- Identify potential risks.
- Describe these risks.
- Include an analysis of the potential impact of each risk.
- Create a plan for the handling of each risk to limit the impact should the risk come to fruition.
When you are completing these steps, ask yourself the following questions:
What sorts of things have already gone wrong in my business that I would like to prevent from happening again?
- Where is there potential for adverse consequences within my business?
- Are there any minor risks that may not be immediately obvious to me?
- What are the major risks my business faces?
- What are the most common risks my business faces?
- Can I prevent any of these risks and, if so, how?
- If these risks are not preventable and they do eventuate, what is the most effective plan of attack for tackling their potential impact?
While thinking about all of these things is all very well and good, risk management planning involves having an actual tangible risk management plan in place, the creation of which may not seem like the most appealing way to spend your time. However, fear not, because the answer to this next question will make the task much less daunting…
Are there resources available to help me with this?
We are glad you asked, because there is a whole suite of resources available to you to make implementing a risk management plan specific to your business a cinch (or, you know, just easier).
Here are some links you may find useful: