That boring topic called risk management
by Kate Sykes
Key points in this article
- Back up plan to protect against supplier issues
- Taking economic conditions into account
- Risks and disaster recovery
As a new and growing business, your mindset is not always focused on risk management – rather, how to make money and keep your business afloat.
The first 12 months are critical for any business and that is when most tend to fail. The key risks that you might need to manage as a business going forward are outlined below.
1. Reputational risk
The value of your business lies in your brand. In your risk management policy you might consider putting in writing various controls to protect your brand including:
- who will handle media enquiries
- carrying out due diligence on potential business partners and online links.
2. Financial risk
How are you covering yourself against financial loss and cash flow shortages? Make sure you have:
- a payment process
- insurance policies
- a good relationship with your banker
- process for reviewing debtors weekly or monthly.
3. Customer risk
This involves processes for customer complaints and customer response rates.
4. Supplier risk
Who are your key suppliers? If one of them is an IT provider, do you have service level agreements in place?
A sudden issue with one of your suppliers could put a serious break on business – have a back up plan in place
5. IT risk
If you’re an online business, your key risk is loss of data or a website attack. You also need to consider:
- virus protection on your computers
- data storage
- backing up of information.
6. Competitor risk
There is always the risk of competitors eroding your market share. What are you doing to stay informed about your industry and your competitors?
7. Economic conditions
Diversify your product or service offering to offset peaks and troughs in your revenue cycles. You can also maintain adequate cash reserves to cover you for a slow period.
Certain economic conditions may dictate when you hold money in reserve (and how much)
8. Key person risk
This is a big risk when you are a small or solo business. Some ways to mitigate risk include:
- having personal trauma insurance
- writing procedure documents so someone can fill in quickly
- having a key contacts list.
9. Business continuity and disaster recovery
There is always a risk that your office could be damaged by fire. What would you do? Some considerations include insurance coverage and data storage offsite.
These risks are real and worth your time and consideration if you don't have a risk management policy yet.
A couple of years ago, I was forced to consider my risk management policy when I filled out the application form for the Telstra Business Women's Award process. As an aside, I encourage all women who have been in business for over three years to enter the Telstra Business Women's Awards process. Even if you are not shortlisted, the process is hugely beneficial in highlighting your strengths and gaps.
ANZ have asked me to blog for them. The opinions expressed here are my own and not those of ANZ.