No matter what type of business you’re running, or whether it’s large or small, every business can face a multitude of potential risks. Some hazards can be so catastrophic that they can destroy a business. Other risks could result in an injury to an employee, a loss of business income or even damage to your business reputation.
The trick is to prepare for risk by first recognising what risks exist and then implementing plans to negate those risks as much as possible.
Tips for Identifying Risk
One of the best methods to gather information regarding risks in your business is to arrange a meeting with all staff members and get their input. Everyone works in different roles and sees different things, so it’s vital that owners and managers liaise with staff when compiling a list of possible risks.
It’s also wise to do some research on similar businesses and discover what problems they’ve had to deal with and what risks they’ve had to face over the years.
Identifying risks is an ongoing process and why it’s important to log everything you think of into a risk management plan.
Analyse the business activities on every level and note anything that could present a problem. Dedicated software can certainly help with enterprise risk management solutions, as it will help you recognise and manage risks, as well as provide vital analytics and reports.
What Are the Physical Risks?
Both the building and the operational practices of the business can present physical risks. These can include things like the operating of machinery, the potential for fire or explosions, electrocution, hazardous materials, debris and obstructions that could cause injury, slippery floors, toxic fumes, dust, poisonous substances, gases, forklifts, other vehicles in the workplace and much more.
It will take some time to both list potential physical risks and to come up with systems to avoid accidents and injury.
Human Risks To Consider
Human risks are about the people that work in the business. We all know people are not perfect and can make mistakes, either accidentally or even deliberately.
Some human risks to take into consideration are the possibilities of alcohol or drug abuse in the workplace. Other risks could include things like employees stealing goods and equipment from the business, or possibly even defrauding the company.
Both illness and injury also come under the umbrella of human risks when doing a risk assessment and creating a risk management plan.
Financial Risks
Every enterprise is going to face financial risks. It’s just a part of doing business. When a business is launched and capital has been sunk into the business, that capital is at risk the moment the business commences, as there are never any guarantees the business will succeed.
Pouring money into business expansion or trying a new direction is another financial risk that businesses must face. Even the purchasing of new equipment could be considered a financial risk.
Financial risks are unavoidable. In order for a business to commence and progress, chances have to be taken with spending funds. It’s a matter of weighing up the risk/reward ratio to determine if going ahead with a plan is viable.
Risks Based On Location
Location risks are something else that need to be considered. Are you in an area that’s renowned for severe storms, such as cyclones or devastating thunderstorms?
Aside from the elements, another location risk could be a lack of customers due to your location, or too many competitors in the same area.
Strategy Risks
Strategic risks can often tie in with financial risks. Business owners and managers have to make decisions on a regular basis. Sometimes these decisions are right and sometimes they’re not. When devising and implementing new strategies or a new direction for the business, there is always the risk that it may not work out the way you planned.
As with financial risks, strategies need to be analysed to determine how risky they really are and what the repercussions would be if they failed.
The Takeaway
It’s worth taking the time to fully analyse your business and list every conceivable risk you can think of. Being aware of the risks is the first major step in effective risk management and the more you mitigate risk, the better it will be for your business.
