Managing Business Risks

Running a small business and managing business risks do not seem a good combination as it can feel like walking a blindfolded tightrope while juggling flaming swords!

From supply chain hiccups to that one “innocent” intern who accidentally deleted your entire database and to inventory approaching the expiry date, risks exist in every part of your business. Managing business risks isn’t about living in a constant state of panic, it is about planning, so you are not cut unaware, and you can sleep soundly (or at least have fewer sleepless nights).

Here’s how to manage business risks and create a plan to keep your business sailing smoothly.

1. Spot the Risks Before They Spot You

The first step in managing business risks is determining what could go wrong. No, this is not about doomsday prepping but about taking a good look at your business to identify potential weak spots. Think about things like:

– Financial risks (cash flow hiccups, unexpected expenses)

– Operational risks (supply chain disruptions, equipment failures)

– Cybersecurity risks (hackers love small businesses – sorry, but it’s true)

– Legal risks (disgruntled employees or fine print in contracts you skipped)

Make a list of your business’s biggest vulnerabilities. Once you know what could go wrong, it’s easier to figure out how to prevent it.

2. Create a Plan

Now that you know what could go wrong, it’s time to play the “what if” game. What if your biggest client suddenly jumps ship? What if there are some delays with logistics? Create a contingency plan for each scenario. Think of it as your business’s safety net – your ‘plan B’ ready to catch you if things go sideways.

Start with your top three business risks. For each one, come up with a plan for how you’d respond, and make sure your team knows the drill too. It’s like a fire drill for your business – without the actual fire.

3. Don’t Put All Your Eggs in One Basket

We’ve all heard it: diversify, diversify, diversify! Whether it’s your suppliers, clients, or revenue streams, relying too heavily on one thing is a recipe for disaster. If that one thing goes wrong, your business could take a serious hit. Spread your risk around, and you’ll sleep easier knowing that one supplier mishap will not put your business in chaos.

Have backup options for your biggest dependencies. Can you find a second supplier? Or diversify your customer base so one big client doesn’t hold all the cards? It’s like having a Plan B – and sometimes even a Plan C.

4. Get Insured

Insurance may not be the most glamorous part of running a business, but when things go wrong, it’s your superhero in disguise. Whether it’s liability insurance, cyber insurance, or business interruption coverage, making sure you’re covered for those “just in case” moments is essential.

Don’t just skim over your insurance policy, understand what’s covered and what’s not. Ask questions. You don’t want to find out you’re missing key coverage after disaster strikes.

5. Build a Risk-Aware Team

You don’t have to manage business risks all by yourself, it is important to get your team involved. When everyone knows what the risks are and how to avoid them, your business runs smoother, and problems get solved faster. Plus, your team can help spot issues you might not even have thought of.

Make risk management part of your company culture. Hold regular check-ins or risk management sessions, educate your staff on potential risks, and encourage them to speak up if they see something off. Your business is stronger when everyone’s got their eyes open.

Managing business risks is all about preparation. By spotting potential issues, creating a game plan, and making smart choices (like diversifying and insuring), you can protect your business from most disasters. It’s like carrying an umbrella on a sunny day – you might not need it, but you will be glad it’s there when nature decides to pour rain or when the sun gets too hot and you need some shade.