Business owners always, always have too much on their plate. One area that we historically just don’t spend enough time proactively is in Risk management. Sadly, this lack of planning many times will be the difference between staying in business and going out of business when a crisis happens.
Proper risk management planning is crucial for small businesses to ensure their long-term success and sustainability.
You can set yourself up for success by doing these 10 things:
1. Identify and assess risks: Start by identifying potential risks specific to your industry and business. What exactly are the operational, financial, and legal risks you could encounter.
2. Create a risk management plan: Develop a comprehensive risk management plan. You need to outline specifically how you are going to reduce your risk, transfer responsibility for it, or fully accept the responsibility for each risk you have identified. This is not a set it and forget it item. This plan is a living document that should be and will be regularly reviewed, changed, and updated.
3. Financial management: As an organization, you should have strong financial controls that are understood across the organization, along with accurate accounting practices. It is imperative that you have adequate cash reserves to cover unexpected expenses or losses.
4. Insurance coverage: Make certain to obtain insurance coverage to protect against potential risks. Common types of insurance include liability, property, workers’ compensation, business interruption and cyber security insurance.
5. Legal compliance: Make certain you stay in the know and in compliance with such things as employment laws, regulations related to your industry, and tax laws. Being uninformed is not an excuse. Noncompliance in these areas can result in extremely costly legal issues.
6. Cybersecurity: It is imperative to invest in cybersecurity. Businesses must protect the sensitive data that they hold. Customer information, employee information, banking details, are all potential pitfalls to business owners. Physical and digital firewalls should be in place, antivirus software, and employee training on data security are some of the first steps to protect your business from the ever-increasing risks in this area.
7. Vendor and supply chain management: Diversify your suppliers, have contingency plans in place to address disruptions in the supply chain. Make sure to monitor the financial health and performance of your key suppliers and vendors.
8. Employee training and safety: Train your employees on safety procedures and best practices to reduce workplace accidents and ensure a safe working environment.
9. Business continuity planning: Develop a business continuity plan that outlines how your business will continue operating in the event of a disaster or other unexpected events. This includes data backup, disaster recovery, and remote working capabilities.
10. Monitor and review regularly: Continuously monitor your risk management strategies and update them as necessary. Regularly assess the effectiveness of your risk mitigation measures and adjust them based on changing circumstances.
Risk management is an ongoing process. We all need to be proactive in continuously identifying and addressing potential risks to our businesses. We can’t do it alone, make sure to see the advice of I.T., legal, and financial professionals to ensure you have a fully built out and comprehensive risk management plan.