Every business has potential risks that often are not identified until it is too late. Undertaking a risk assessment is an important part of the strategy and business plan management. It is best undertaken as part of a strengths, weaknesses, opportunities, and threats analysis. But understanding the risks before it is too late and determining a mitigation plan or process will help you sleep better at night.
The first step is to undertake a risk assessment and document as many of the potential risks to your business as you can think of and also share these with your team.
You need to consider:
- The risk - what is the risk and can it be avoided
- Severity/priority - how might it effect the business
- Action to be taken - what action can we take to mitigate the risk
- How often to review - how often do we need to review this
- Who is responsible - which person or organisation will be responsible
Some example risks to your business
- A key supplier cancels or disappears.
- Core technology (e.g. website) fails.
- You lose key staff.
- Your office and equipment is destroyed.
- Your stock or warehouse is destroyed.
- A major customer sues you.
For each risk that you can identify you need to determine how you can handle that risk and there are four paths to take.
Accept the risk:
You have a potential risk that may occur but you can handle it is a part of the normal business processes.
Avoid the risk:
Put in place some action or process that means that this is no longer a potential risk to the business. This might be done by building in safe-guards or having alternative or replacement capabilities available.
Reduce the risk:
You see a risk but it can to mitigated so as not to cause catastrophic business failure or loss of revenues.
Transfer the risk:
This might be a risk that can be passed on to a service provider or to some other supplier to your business.
You can read more about the SWOT and developing a Risk Assessment at the eCorner Blog - What's waiting around the corner for your online business - Assessing Risk.