Minimising Business Risk
If we met at a conference and I began to start talking Cyclops with you (the subject not the language), I have little doubt that your first reaction would be to move away quickly, probably thinking ‘why on earth would someone be talking about Cyclops with me?’
However, for the sake of argument, should you decide to engage in a discussion on the subject at the hypothetical conference, I would wager the conversation would focus on the fabled giants only having one eye without much consideration as to the reason for their monocular vision.
While the fact they had one eye is commonly known, what is generally overlooked about Cyclops is the reason for having one eye. For those of you who don’t know, legend would have it that that the Cyclops were tricked by the Greek gods into trading an eye for the ability to see into the future, only to find that the one future they could see was the day of their own death. A burden they were forced to carry for the remainder of their lives, unable to change that future.
‘Fascinating’ I hear you say ‘but why are you telling me this in what is supposed to be an article on risk assessments to assist small business owners?’
Well, please let me expand. Before you switch off believing too much time spent watching Clash of the Titans has clouded my judgement (or because you now have an inexplicable urge to watch it), I would like you to consider the value of knowing what could be fatal to your business before it happens and if given the chance, how badly would you want to know?
You see I am not talking about a knowledge of an actual death but rather a commercial one. Something that could kill your business. An event which could jeopardise everything that you have been working towards.
Unlike the Cyclops who could not of course change their future, in business you often can if you know what may potentially happen and have prepared in advance for those possibilities. Now is this starting to make sense?
For me conducting business risk assessments and preparing contingency plans should be something of a no-brainer for anyone in business. Being aware of the various pressure points in a business model and having in place the strategies required to minimise the risks that these present should be as relevant to your business as the premises in which it is based. While you cannot predict every future, you can prepare for and avoid many eventualities.
Despite this, I regularly meet business owners who would prefer to tackle a great white shark than undertake a risk assessment on their own business. I distinctly recall a discussion with an owner manager who stated he would prefer not to know. I understand that being confronted with the weaknesses in your business may be challenging, however, it is better for you to be aware of these before they happen. What you don’t know can very much hurt you.
By undertaking risk assessments business owners can plan appropriate responses so as to minimise potential risks, and ideally, avoid the worst of what could happen. Knowing of potential risks enables businesses to ensure against such risks. If there is an Achilles heel in your business, then it is far better that you find it before your competition does. Unlike the Cyclops, you have the ability to change things and it shouldn’t cost you an eye.
Although each business will be different, I have jotted down some areas to consider if you decide to undertake this task to avoid it becoming a ‘Herculean labour’. I hope these help.
Risk Assessment Checklist
- Customers – Who are they, how do you get them, how do you keep them, and how might you lose them?
- Competition – Who is your completion, what new competitors may enter the market, and how you would respond to this?
- Suppliers – Is your business reliant on certain suppliers, what you would do if they were lost, what other suppliers could be used and what the consequences may be of changing supplier?
- Employees – How reliant is your business on key employees, could they be replaced, do you have anti-compete provisions should they leave to join the competition?
- Business Premises – Do you own or lease your business premises, how dependant are you on location or could you find alternatives, what is the ability to expand?
- Technology – How up to date are your systems and what is the cost to update? How exposed is the business to a system crash and how would you react?
- Economy – What is the economy doing and how this may affect your business? Are exchange rates a factor?
- Consumer trends – What is the longevity in what you do or is there a risk your services or product will become obsolete?
- Workplace Health and Safety – Do you comply with the regulatory requirements and how can you improve?
Neither the list nor the questions above are intended to be exhaustive. It has been provided to stimulate thought and get you started.
You can of course pay someone to undertake this type of project, but often it is as simple as discussing these issues amongst your management team and with the employees. Try and brainstorm what may happen and then devise possible strategies to solve the potential risks identified.
If you are still struggling, give your accountant or business adviser as call, and they will help.
And if we do meet at a conference, feel free to run any business, legal or mythological concerns by me. I am always happy to take questions.