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.
By identifying what could go wrong, evaluating which risks should be dealt with and implementing strategies to mitigate those risks, 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. It also 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.
Analyze your List
Once a list has been compiled, you can 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.
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.
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.