Risk is a part of everyday life. There are many types of risk that will be encountered in business. Some will have a minimal impact and can be managed easily; others may threaten the longevity of a business. Understanding the principles and processes for effective risk management will help a business owner make the decisions necessary to ensure the best possible outcome for the business.
Risk is one of the most overlooked areas in small businesses in spite of the fact that it is clear to most small business owners that operating any business involves risk. While taking a risk and winning is fun, prudent business owners take care to minimise the risk, just as you would in any other type of risky venture you undertake. A good risk management system is a continuous process of analysis and communication.
Sloppily thought out risk management plans are almost as bad as none because they can be time consuming with no long term benefit. For example, backing up computer data on an external hard drive every day and storing it in an onsite vault may save the information from potential corruption or erasure, however what would happen if fire or flood took out both the computer and the contents of the vault? While you may think it unlikely, it is still quite possible, so planning for the absolute worst case will help you through many a bad moment.
You prepare for marketplace risk through your business plan. In the same way you need to prepare for the risks of illness, disability, damages, losses, injuries, and even disasters. A good risk management system not only has adequate insurance coverage to compensate you for losses which might occur, but it also includes a plan to prevent losses, if possible, and to manage unexpected events as they occur.
Contact Tradies Accountant if you would like more information.