Many business owners don’t bother with defining Risk Management Plans as they believe you cannot control the unknown.
What you can do is sit down and (if you have one) draft up a SWOT sheet with your team.
Doing this is never a waste of time as it focusenghtes you on your businesses strengths, weaknesses, opportunities and threats. If you don’t know what these are then perhaps your competitor might!
To start, draw line down the middle of a sheet of paper (or whyte board). On the left write Strength & Weakness – on the right Opportunities & Threats.
The left hand side represents internal risk that you have some control over. On the right hand side are the external forces you have little to no control over.
Ok, so by listing internal strengths and weaknesses you can select and prioritise those strengths that give you an edge in the market place that you can further build on.
The Weaknesses can have plans defined to improve and strengthen them. Some weaknesses may related to
- lack of expertise in a specific area
- absence of agreements or contracts with suppliers or clients
- weak marketing or sales channels
- lack of a decent value proposition
- over dependence on a particular client for revenue
Your Opportunities may be:
- areas of the market that up until now you have not approached
- an alliance partnership that could expand your potential reach
- a new supplier for your products
- creating new services for existing clients
Your Threats are (in most cases) outside of your control. Some examples:
- changing government policies/legislation
- new competitors entering the market
- old competitors doing deals with your suppliers/contractors to choke your supply chain
- the larger economic landscape
Reviewing your business against the backdrop of risks and planning for these risks is prudent. Once identified a risk can have a “trigger” event defined which gives a signal that certain activities are to be performed. These activities will mitigate or lessen the impact of the risk event on the business.
Take for instance the risk of losing key staff.
Plans can be developed that ensure training and remuneration for staff are a priority along with good communication systems to keep a finger on the pulse of the employees.
Part of your Risk Management Plan is appropriate contingency activities in the event of the risk being realised (having occurred).
In the example of key staff leaving then you would have thought about how to up skill existing staff to replace the outgoing resources or how to recruit replacements.
These processes wold be documented and tested to ensure you have a safety net. Without this level of planning you really are running a Risky Business”!