Previous Story
Risk Management 101 For Small Businesses
Any business, no matter what its size or how successful it is, is open to risks or threats occurring within the business that could have catastrophic consequences. For small businesses, managing risks is particularly important, because limitations in size and capital could wipe it out if something negative occurred. A well-implemented risk management plan can help to reduce the impact of any risks and limit any damage caused. Here’s what every small business owner needs to know.
What is a risk management plan?
A risk management plan is a process that small businesses should put into place, so they are aware of any potential risks to their operations, as well as how they should go about reducing the risk from occurring and managing it, should it take place. Risk is something that can’t be completely controlled, so investing time and effort into developing a plan should give a small business the confidence and capability to handle crisis events.
However, a small business will not have unlimited time, capital and resources to spend on risk management, so it should try to strike a fine balance between identifying the most likely risks for their business rather than trying to cover themselves for every eventual risk, at the expense of developing and growing other areas of the business.
Identifying the risks
The first step in developing a risk management plan is to ascertain what the potential risks are to that business. Each business is different, so the risks will be unique, but there will be some generic risks that all businesses need to consider. For instance, the threat of damage to the business property, theft, fire, legal liability, key personnel loss, injury and fraud are all areas that any business would consider as risks.
Grade the risks
The next part of the process is to grade each risk in terms of how great a threat it is to your business. Focus and prioritise on the high-risk areas and create a contingency plan how you aim to minimise the risk occurring.
Devise a contingency plan
An essential component of risk management is to devise a contingency plan. For this, you’ll need to detail what measures you are taking to avoid the risk occurring and how you will reduce its impact if it does occur.
For most organisations, no matter what their size, the first part of this plan will be to purchase adequate insurance to cover elements such as liability insurance and commercial property insurance. This will need to be regularly monitored and reviewed to ensure the business is still correctly covered for any losses, should they occur.
There are lots of other measures that a company can take aside from taking out adequate insurance to protect them from risks. For instance, a company could develop policies on how they would deal with potential crises. Each individual could write detailed procedures on how they do their jobs, so that continuity can proceed, should a worker leave suddenly for whatever reason.
Training and appropriate management are important elements for protecting against risks, so workers know who to turn to should problems occur.
Implementing an effective security system, both with regards to the company property and the use of vulnerable company information on software systems is also an essential step to reduce the risk from fraud, theft and cyber attacks. To combat this you could send yourself, or your staff, on an information security course which will teach you how to correctly handle sensitive data.
Review
Once a risk management plan has been put into place, it will need to be regularly reviewed and updated to adapt with any changing elements of the business since the plan was first executed. This is a vital, ongoing part of the business process.
This article was written by Crispin Jones, a freelance writer who recommends QT&C for information security training.
