To many the concept of formal risk mitigation may seem overwhelming or complex, but
breaking it down into smaller areas and working with someone who can help explain items that may seem daunting (such as a “risk register”) may save you a significant amount of money, or perhaps even your business.
Business owners need to manage their resources carefully; unfortunately, unexpected risk can make managing these resources complex. Here are some tips to help manage common business risks:
- Start with allocating time once a month to review your risk situation. Once comfortable with this process, it will take you less than 30 minutes a month.
- This time should be spent on risk identification and mitigation. Formally called a “risk register”, create a table that identifies risks (by name) and estimate the impact it would have on your business assign a score between 1 and 5.
- Next assess how likely the event is to happen and assign it a second score 1 to 5. This scoring will help you identify the risks that are most dangerous to your business.
- Now review the list and identify activities you can undertake to reduce the impact or probability of occurring (mitigation). Mitigation activities may include purchasing insurance, implementing alternative approaches, or preparing for the event if it should occur.
- Create a written action plan to carry out the risk mitigation activities outlined above.
Next month quickly re-assess these risks, add any new risks to the risk register, and follow the same process.
Surprisingly, these simple steps can significantly reduce your exposure to risk; at the same time, many businesses fail to review and update their risk registers on a regular basis. The result can be catastrophic and disruptive to staff and customers.
Examples of factors to consider in your risk register:
• Financial slowdown
• Building maintenance
• Equipment failure
• Errors made by staff
• Loss of a key individual
• Your health
• The list goes on…