One of my favorite local restaurants suffered a major fire damage last year due to an electrical failure next door. For two months the restaurant was boarded up, and eventually closed down.
Unexpected business emergencies happen. Even though you cannot avoid them, you can impact the way you rise above these events by being prepared and protected. There are a few questions businesses can ask to manage risks:
1. What are the “risks” to my business?
Depending on the nature of the industry, risk can mean different things. A business risk should be tied to a company’s overall objectives. For example, if the objective of a restaurant is to provide quick turnaround and top customer service, the risk of fire that closes down the restaurant is then more critical than the risk of rising food cost. Defining risk criteria will help you understand what risks are in your business.
2.Where do they exist in my business?
It is important to examine your entire business process to identify all possible problems, not just the obvious ones. The more thorough and specific you are, the more solid your risk management plan will be.
3. Which risks are more important?
Depending on the risks, they have different impact on business operations. They also have different likelihood of occurrence. By prioritizing them, you are better able to identify and understand the root cause of these risks.
4. What can I do to mitigate the risks?
By developing steps to be taken or outlining the alternative actions, one can eliminate or mitigate the risks. Detailed risk management plans should be created for the most critical areas, with considerations given to the rest.
5. How do I know if the plan is working?
By activating the alternative business practice or the backup plan, you can test the effectiveness of it. This also helps you evaluate and refine. Lastly, by updating the plan annually, you can ensure the assumptions are relevant.
Sandy Huang is the principal of Pinpoint Tactics Business Consulting in Vancouver, BC. She strives to empower small business owners by equipping them with the tools they need to be more competitive and profitable. Sandy also teaches business courses, conducts workshops, writes for the Vancouver Observer and sits on the board of Burnaby Counselling Group.