In the world of risk management, every business has its fair share of challenges and as an entrepreneur, you’re especially going to face the good, the bad, and the ugly of it all, especially if you’re in the beginning stages of your business. When speaking of a business’ life cycle, it’s pretty cut-throat in a sense, wouldn’t you say? Your business either survives or it doesn’t… plain and simple.
What people don’t realize is that a business’ survival is based on odds. As a business ages, odds are it’s survival rate will improve, according to the Small Business Administration. Not sold on that? Well, lets look at the odds.
A small, new business has a lower chance of surviving long-term because a multitude of risks and challenges are up against it… this is where you could say the odds are against new businesses. For larger, more established companies, the odds are in favor of these companies because they’ve been around longer and overcome the many risks and challenges faced when first starting out.
So, since the larger, more established companies have beat the odds, how can a small, new startup company beat the odds as well? Well, the business owner of that small business is going to have to learn what it takes to properly manage their business.
How to master risk management
Risk management isn’t something that you’re born with nor is it something that business owners enjoy… in fact, business owners wish they never existed in the first place! But regardless of what you wish, risks are all around you and you can’t always play it safe in the business world, so it’s better to know how to manage your risks and come out on top. Here’s how you do it.
Identify your business risks
In order for you to master risk management, you first have to be able to identify the risks that your business could potentially face. In order to do that, you’re going to have to look at every aspect of your business, from top to bottom. Some risks are going to be very easy to identify, especially those that involve any aspect of security and safety… it’s the risks that aren’t as easy to identify that are going to be your biggest threat if you don’t identify them after so long.
Assess the severity of the risks you’ve identified
When assessing the severity of the risks of your business, this can be a hard truth to face. You’ll need to ask yourself in risk management what the odds are of your business actually encountering these risks and if your business did encounter these risks, how largely would your business be impacted by them?
For example, lots of small businesses, especially home-based businesses, tend to think that obtaining business insurance isn’t necessary because the business is home-operated. Home-based business owners think that if anything were to happen to their business, while at home, their home owner’s insurance policy would take care of it… that thinking is how lots of small businesses fail.
Being a home-based business, you’re just as much at risk as a brick-and-mortar business. If a hurricane hit and destroyed all your business equipment at home, your home owner’s insurance isn’t going to cover a thing. The odds of instances like that happening to your home-based business might be low but you still need to account for it and have a plan in place like purchasing a business insurance policy to ensure the safety of your business equipment.
Reduce your risks
Now that you’ve used the first steps of risk management to assess all the risks your business could potentially face, now it’s time to take measures to reduce those risks. Some efforts to reduce certain risks will be easy to put in place. For example, to reduce employee injuries, simply list all behaviors that can present injuries to employees and forbid those behaviors for safety reasons.
You’re not going to be able to completely get rid of all the risks but you can drastically reduce them or at least come up with an alternative method of achieving the same goal or task.
Observe and monitor your risks
When it comes to vigilance in the workplace, observing and consistently monitoring is the only way to ensure rules are being followed and safety standards are being practiced on a daily basis. Now, it’s pretty safe to say that when management is around, everyone follows the proper order in which things are supposed to be done, but if management steps out, people are, of course, going to cut corners and do things the easy way and cut out some seemingly unnecessary steps.
When you catch those types of occurrences happening, you must address the issue immediately. You can address the person directly that’s cutting corners or you can address the team as a whole just to make sure that everyone understands the importance of following the practices and policies of risk management. They need to understand that their safety is your biggest concern and priority and it’s going to take a team effort to enforce it.
Conclusion
Ultimately, you would prefer it if no risks were involved in business but it’s inevitable. By taking the risk management steps to identify, assess, reduce, and monitor your risks, you’re giving your business a fighting chance of beating the odds of its survival rate.
