You’ve invested a lot in your small business.
There’s the money you spent setting it up and the time you’ve devoted to keeping it running. There’s also all of the emotion you have poured into it. The passion you have for the product you sell or the service you provide. The care you have for your customers and staff. The pride you have in all of the little wins you have achieved.
It’s only natural you want to protect what you have built. To fortify it against the many and varied challenges that could come your way. To make sure that, even if the worst does happen, you are prepared and will make it through.
Define your risks
Articulating the challenges your business faces will make them much more manageable. To do this, ask yourself questions like:
- Do the materials or equipment I use pose any safety or health risks? What incidents could hamper – or completely stop – operations?
- How do I keep my business and my customers safe online? Are there gaps in my existing cybersecurity measures?
- What are the main regulations that the business needs to comply with? Are these likely to change?
Every business is different, so the specific considerations and vulnerabilities you need to be aware of will be unique to you.
Assess your risks
Chances are, the list of potential issues you need to manage will be quite long. However, some will be more serious than others, and not all of them will need to be dealt with straight away. So, it’s worth spending some time considering the likelihood and potential impact of each risk, and prioritising them accordingly.
For example, you may have both natural disasters and supply chain issues on your risk list.
Bushfires, floods, and severe storms could be catastrophic for your business. Delivery delays, material shortages, and increased transport costs can also have a serious impact on your operations. While you can’t predict either event, you can be prepared for both. Though both deserve attention, strengthening your supply chain should be a higher priority than planning your response to a natural disaster.
Plan how to address each risk
Working out how to address all the potential threats to your business can be quite a daunting exercise. Different types of issues will require different types of responses. For example:
- Good financial hygiene, like strict adherence to budgets and careful tracking of cash flow and expenses, can help mitigate most financial risks. A cash reserve also provides a financial buffer, reducing the potential impact of unexpected costs.
- Public liability insurance protects small businesses against claims of harm (property loss, personal injury) to third parties (customers, site visitors).
- Commercial risks can often be minimised by diversifying your client base and expanding your product or service offering. For example, creating passive income streams and targeting new markets reduces your susceptibility to regulatory changes and market downturns.
- Reputational risks can be harder to predict and control. They usually require ongoing monitoring (media monitoring, social media listening) and the development of response protocols (crisis management strategies and communication plans).
- Processes for using dangerous machinery and handling hazardous materials should help prevent most injuries. Requiring the use of appropriate PPE (masks, earmuffs, safety glasses) can further reduce this risk.
- Many emergencies cannot be predicted or prevented, but you can plan how you will respond. These plans should be trialled regularly (drills, simulation exercises) to reduce confusion and ensure they are still fit-for-purpose.
- Your team can also be your strongest defence against many different types of risk. However, you need to make sure they have a clear role to play and understand what is expected of them.
Remember, not every risk needs to be dealt with straight away. Start with the highest priority and make your way down the list.
Review your risk plan regularly
Whether you’re aware of it or not, your business is constantly changing and evolving. It has to, to survive.
It reacts to movements in the market and reflects customer demands and expectations. It adapts to new technologies and responds to changes in legislation and regulatory requirements.
At the same time, the threats to your business also evolve. New risks rise, and old risks become less relevant.
To keep pace with this, you need to establish a regular cycle of revisiting and updating your risk plans. The ideal length of this cycle will depend on the needs of your business, though reviews should be at least annual.
Also Read: Exploring Global Business Operations: 7 Wise Tips from Accountants
