Mitigating the risk factors

By their very nature, successful entrepreneurs are optimistic. Over time they’ve had to face many challenges and they tend to be confident in their ability to handle whatever comes their way.

Optimism and risk

It may be this optimism that puts the discussion of mitigating risk factors far down the list of priorities for some entrepreneurs. Yet the reality is there are many risk factors that can quickly limit the growth potential of your small business, and derail the best-laid plans.

These risks can be in the form of catastrophic events, such as:

• A fire in the business’s premises.
• The death of one of the owners.

Or they can be more systemic in nature, subtly undermining your strategies over time. Anticipating the risks to your business and taking steps to mitigate them before they happen will protect your enterprise.

A risk management model

Successful businesses take specific steps and use a number of strategies to manage risk, including:

1. Identifying the source of the risks.
2. Being proactive in anticipating their impact.
3. Taking steps to mitigate the risks.
4. Identifying strategies to avoid the risks.
5. Adapting quickly when risk levels become unacceptable.

This becomes a model or a repeatable process that can be used to protect your business.

Identifying areas of risk in your business

Before defining your plans to mitigate key risks, you need to identify the risks themselves. The best place to start is your business plan. Consider all the sections and subsections of your business plan.

Review your assumptions and potential threats to your business. Also, consider the financial aspects of your business plan that could be threatened.

Contingency plans

Taking the time to map out the risks that could affect the continuity of your business and create effective contingency plans is a task many small business owners prefer to avoid. After all, there’s always tomorrow to think about potential problem areas.

If you need motivation to address contingency planning, look no further than:

• Your family.
• Your employees.
• Your clients.

Consider how they’ll also be affected by an interruption – or even a profound failure – in your business. Contingency plans create practical responses to each key business continuity threat listed and answer the question “How would my business survive and thrive if…?”

The continuity of these businesses over time – often over generations – and the livelihood they provide to employees are testament to the importance of continuity planning.

The role of communication in risk management

It might seem simple but the best risk-management system you can create in your business is good communication.

When management and staff enjoy an environment where communication is healthy, they work more effectively as a group and more freely exchange information that can help identify risk factors early, and find practical solutions.

Create a trusting workplace

It may be as simple as communicating safety guidelines or identifying the reasons for negative customer trends, but there are benefits for everyone when you can create an open, trusting workplace. Every team member should understand his or her role and work together to contribute to the success of your business.

By making the job of identifying risk factors, and developing strategies that address them a business wide goal, you increase your effectiveness in mitigating those factors and increase the likelihood of finding effective alternatives that protect the continuity of your business.

As with all things in business, risks can be managed and you can avoid many of the pitfalls that can threaten your ability to unlock the potential in your business.