If you’re an entrepreneur, you likely find yourself more open to taking risks than some other people you know. After all, to create or buy a company takes guts, thinking differently from most, and being comfortable trying new things.
Yet, as the global COVID-19 pandemic has shown us, businesses are continually faced with risks of all sorts. To ensure your venture can survive obstacles and setbacks, you must be strategic in your management and take steps to mitigate risks wherever possible. Read on for three top risk-management strategies to implement in 2021.
Examine Where Risks May Lie
First, examine where exactly risks may lie in your business. What could pose a threat to your venture’s operations right now or sometime in the future? Think about preventable internal and external threats you can work to avoid by reducing or eliminating the risks, transferring them, or accepting them.
Risks can crop up in many areas. Some might be specific to your industry, many will likely be specific to your business, and some will be general ones that could affect any business owner, such as natural disasters, IT glitches or hacks, or terror attacks. Consider health and safety risks such as falling objects, exposure to toxins, collapsing buildings, car accidents, slips, and trips, etc. There are also potential risks internationally if you work in or export to foreign markets that could be affected by economic or political instability.
When assessing potential risks, think strategically, too. For instance, are there threats from market competitors or changes in the industry? What could happen if new laws or regulations come into effect? Could you suffer from serious exposure financially if customers don’t pay you on time, people steal from your business, equipment breaks, business loans fall through, or supplier costs increase? Spend time considering where risks may lie, and you’ll be in a better position to reduce the likelihood of them happening and the negative impacts if they do.
Spend Time Planning
Next, it’s time to plan. Take the potential problems you’ve listed and look at your business plan with them in mind. Your comprehensive plan should cover a rundown on areas such as customer analysis, current and future marketplace(s), and financial projections. Other topics include sales and marketing strategies, investment needs, product or service expansion plans, and a SWOT (strengths, weaknesses, opportunities, and threats) analysis.
Paying attention to the risks you identified and your business plan should help you find clarity on how to address potential threats. It’s likely to also help you see where you need to focus most in the coming year or two. For instance, if you know a potential new law might come into play that could significantly impact your business operations, this is something to keep a close eye on.
Plus, develop an emergency management plan. This document gives organizational leaders and the rest of the team a roadmap to follow if a risk becomes an actuality. In your emergency plan, detail how people should best handle internal and external emergencies.
Put down, step by step, what staff members need to do if disaster strikes, in order of execution. Add checklists for employees to follow and discuss plans with your team. Give everyone set responsibilities so they’re all clear on what they must do, personally, if things go wrong.
Execute Measures to Actively Reduce Risk
After all your research and planning, be proactive and take measures to reduce the chances that threats come to pass. Entrepreneurs can’t avoid all risks, but they can take steps to mitigate issues and outcomes. For instance, focus on developing a safe working environment for your team. Workplaces should be clean and well maintained. Train employees on how to reduce the chances of accidents happening onsite, and how to handle and store hazardous items. Ensure all equipment and assets are used safely and looked after to minimize malfunctions and endangered lives. If your business requires handling dangerous chemicals, make sure to do COSHH.
Do your staff have to work with or transport dangerous materials or products? If so, create strict processes for how these get packed and moved from location to location. It pays to use tech tools such as a quality impact recorder or temperature indicator to keep goods safer in transit and alert staff and contractors to potential dangers.
Other ways to actively mitigate risks include buying insurance and diversifying your range or the customer base you target. You can also utilize outside assistance for regulatory matters and other specialized areas, maintain detailed business records, and keep on top of cash flow.
It is highly suggested for businesses, whether large or small, to digitalize their contracts with their employees to reduce any mishaps in the future. A contract management glossary may be of help in understanding the contracting language.