I get it. In this pandemic environment, you are trying to keep your small to medium sized business afloat. Or, perhaps you are fortunate to be experiencing a boon as a result of the pandemic. Regardless of your situation, it takes a lot of time to manage all the changes you are trying to put in place to maintain your competitive advantage.
Now, more than ever, you need to ensure that you have sound risk management practices in place!
Risk Management Applies to Your Small Business
Many businesses recognize the need to manage their risks. However, when you are a relatively small business, you often tend to think that implementing a risk management process does not apply to you.
But all businesses have risks, and all businesses should strive to manage those risks – regardless of its size.
Moreover, risk management is especially important for small to medium-size businesses, which are fundamental to many economies but tend to fail for a variety of reasons.
A risk is any event that can introduce uncertainty in your ability to meet your business objectives. Risk management is the process of identifying the risks your business is exposed to and having a plan in place to monitor and manage those risks.
While there is no guarantee that your business will survive even with proper risk management, having a good risk management process in place can prepare you for the ups and downs your business may encounter. This is especially relevant in this pandemic environment.
Small Businesses Do Have Time to Manage Risks
You may feel that as a relatively small business, with all the uncertainties in this environment, you do not have the time to manage your risks. Against this backdrop, you have to deal with big issues such as increasing your sales, meeting customer demands, implementing government mandates, or paying your employees.
Furthermore, you think your risks are relatively small and therefore, it is not necessary to have a formalized risk management process.
This may or may not be true for your business – but are you certain of this?
Were you prepared for the pandemic? If you were, perhaps you are right or just lucky! But do you really want to leave your risk management strategy to chance in this changing environment?
You must make the time to identify and understand your risks for the safeguarding of your business because this is just as important as your other big issues!
What Does Good Risk Management Look Like?
Your risk management approach does not have to be complicated. The time you invest in managing your risks should be tailored for the size and complexity of your business.
At a minimum, you should be able to answer these questions:
- What are the risks your business is exposed to?
- What is the likelihood of these risks occurring?
- What would be the impact on your business if risks occurred?
- When do you become concerned when risks materialize?
- Do you know the current status of your risks?
- Who is responsible for monitoring your risks?
- What do you do when risks do materialize?
Changes Can Introduce Risks
In this new business environment, you are probably trying new and different approaches to the way you conduct your business.
Perhaps there is a new product you would like to introduce to your customers. Maybe, you are trying a new method for the way you process your sales and communicate with your customers. Or perhaps, you have to make changes in order to implement government mandates.
Whatever the change is, it has the potential to introduce risks to your business.
According to the Federal Reserve Bank Survey of Small Businesses in the US, 37 percent of small businesses expect that the most important challenge stemming from the pandemic in the next 12 months will be weak demand, followed by government-mandated restrictions or closures and supply chain disruptions.
Will you be adjusting your business to meet these challenges, and do you have a plan in place for managing the risks these changes introduce?
If you do not have a process in place to identify and manage your risks, you may encounter unexpected consequences that could have otherwise been avoided. And when you’re a relatively small business, these unexpected consequences could be detrimental to your success. Therefore, it is important that if you do not have a risk management framework that you fix that!
