As a business owner or manager, you deal with risk on an almost daily basis, and a risk that develops into a serious problem is probably something you greatly fear.
This is why you need to ask yourself what you can do to reduce the amount of risk your business faces, and the most straightforward answer is to develop a thorough risk management plan.
A decent risk management plan can decrease the risks or problems your business faces by up to ninety percent or more.
But first, what is risk as it applies to business? Business risk is simply the chance that your company will take a loss rather than a profit with a particular project, product, or service you offer. It can be influenced by a host of different factors, including the state of the economy, government regulation, and competition to name a few things.
Therefore reducing risk (and having a risk management plan) means increasing the chances that your business projects, products, and services are successful.
Here are the five simple steps to writing a risk management plan for your business:
Step #1 – Brainstorm
The first thing you need to do is to brainstorm a list of all possible risks your business faces, large and small. This is best done with other people who work with you rather than just yourself.
You should also divide your brainstormed list of risks into different categories, including but not limited to each of the following:
- Product Development
- Customer Service
- Lead Generations
- Turning Leads Into Sales
- Demo Products
- Closing The Sale
Step #2 – What Are The Consequences?
Now that you have your list of risks, you need to ask yourself what the consequences will be of not meeting each one. Actually write down these consequences next to each individual risk on your list.
It’s also important to be as specific as you can be with the stated consequence. For example, don’t just say “Product Release Will Be Delayed,” say “Product Release Will Be Delayed By Two Weeks Minimum.”
Step #3 – Which Risks Are More Likely?
Certain risks will be a larger priority to mitigate than others, and determining which ones will the biggest priority will be to ask yourself which risks are the most likely to happen.
How can you determine which risks are the most likely to happen (and thus become real problems)? You’ll need to talk to everybody involved in the project of your business (management, production engineers, marketing teams, etc.) and ask them what they believe the most urgent or serious are based on their expertise. At that point, you can prioritize your risks into a new list.
Step #4 – Assign Responsibility
You can now begin to create an actual plan to reduce risk, and that starts by deciding which people or department will be responsible for each area of the risk.
This step should be fairly simple. Your marketing team, for example, is clearly responsible to ensuring that your marketing campaign for your product or service goes according to plan and on time.
Just be sure that you clearly communicate to each employee or department that they are responsible for reducing risk in their respective areas.
Step #5 – Devise An Appropriate Response
Now that you have your full list of prioritized risks and have assigned responsibility, it’s time to begin devising an appropriate response to each area of risk should it begin to get out of control
Again, work with your employees or department in their specific areas. With the example of the marketing team, sit down and work together to come up with an appropriate response for each risk you have on your list. Should your marketing efforts end up not being as successful as you projected, what will your back-up plan be, for instance?
Writing A Risk Management Plan
Will you be able to eliminate all risks in your business? Obviously not, but a proper risk management plan will be immensely beneficial for minimizing any risks you face and hopefully prevent most of them.
In other words, a proper risk management enables you to avoid a risk before it evolves into a problem, which is even worse. Therefore, your plan needs to identify the risks your business faces, the consequences of likelihood of each one, assign responsibilities of managing those risks to different people or departments in your business, and have an appropriate response to each one.