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Using Risk Management When Planning Your Small Business

by on December 22, 2020 in Uncategorized

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The decision to open up a small business has never been hassle-free. More stress-inducing than this is the idea of running your fledgling business and, all the while – mitigating the risks involved in managing it.

No business is risk-free. Some are riskier than others. Small businesses are particularly prone to failure if ample risk management measures weren’t in place. Putting in the legwork to avoid future consequences is what it eventually boils down to.

Time and time again, research has shown that for a small business to succeed, it is imperative that you look into your company’s infrastructure thoroughly to be able to tread the right path.

Provided here are tips that shed light on the what’s and how’s of small businesses risk-management. Alongside this, we’ll be delving into the classical method of planning risk management by way of identifying, assessing, managing, and monitoring.

Technological Adaptation

Small and medium enterprises have always been the lifeblood of our global economy. Studies show that more than 90 percent of the business population is represented by small businesses. The ever-advancing technological innovations call for businesses that can adapt to change properly. With most of our private data being online, small businesses are now all the more susceptible to cyber risks.

Half a century ago, the last thing on every manager’s mind was cyber risk management. Things have changed drastically nowadays. Criminals can target confidential information, from employee social security numbers to the credit card information of the clients. Experts from Bulletproof.co.uk highlight the necessity of having vulnerability assessment measures in place, along with implementing regular penetration-testing services. These can act as pillars to your business’ cybersecurity.

Risk Management Plan

Even if you think you’ve got it all under control, proper planning is of the essence. Without it, you won’t be able to gain clarity when it comes to your company’s future. Scroll through to learn more about the chronological steps you can take to outline your plan efficiently.

Identify Risk

This is perhaps the most important step since there won’t be much to plan for without it. Like any other planning, brainstorming with your team members is a good start. You might not be able to protect your business against every threat out there, but you can indeed narrow down the probabilities of failing against the common risks.

You can further subdivide risks into two categories: internal and external risks. The risks that are considered internal could range from anything from low staff-morale, employee turnover to equipment repair and technological malfunctions.

As for external risks, they’re often outside your scope of control but identifying them is crucial, to say the least. In doing so, you’re allowing your company to gain flexibility in the face of external risks that would have otherwise rocked your business foundation. Economic downturns, family issues, and regulatory changes are a few common external risks you should be aware of.

Assessing Risk

Following the first step is assessing the risks you’ve successfully identified. Look for patterns and analyze their likelihood of occurrence. Different risks impact different aspects of your business. You ought to determine if existing control measures are adequate.

Questions like ‘what can happen and under what circumstances?’ and ‘what are the possible consequences?’ are the kind of questions you should ask at this stage. Remember, the aim here is to evaluate potential hazards and minimize the risk level by adding control measures.

Managing & Monitoring Risk

Once you’re done assessing the risks, it is time you put some strategies in place to safeguard your company from future threats. Appropriate risk-response strategies should be the focus of your agenda.

Risk-response strategies are quite useful in tackling potential risks. Current research indicates that, depending on the nature of your business, different strategies may be applied. Avoid, mitigate, transfer, accept, and escalate are all strategies that could help save your business if and when you come face to face with the identified risk.

After this, the stage where you step back and reap the benefits of your efforts begins. Now that you’ve successfully identified, analyzed, and managed the risk, it is high time you monitored how your defense mechanisms function in practice. Actively look for patterns whenever you overcome any of the identified risks and gauge your responses accordingly. 

Takeaway

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Make sure to keep your employees engaged and happy throughout the process. This will improve the quality of their work and drastically decrease the hefty expenses involved with employee turnover. Some of the risks mentioned here aren’t necessarily under anyone’s control. Keep this in mind next time you lean towards blaming certain groups in your company for the shortcomings due to risks.

At the end of the day, we’re humans, and as such, we’re highly susceptible to making mistakes; hence the term: human error. Therefore, an open mind and a sense of curiosity could go a long way in keeping you at the top of your game.

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