Tuesday, September 24, 2013

What does risk management mean to a small business owner?

Risk management is the analysis, assessment, control and avoidance, minimization or elimination of unacceptable risks. What types of risks are we talking about? Loss of key customer, loss of key employee, loss of key supplier, damage to facilities or equipment from fire or weather, theft (of real property or intellectual property or identity).

Every business, no matter the size, should conduct a periodic review of its risks and determine if there are adequate plans in place to minimize them. We have had a couple of storms in our area this year which proved to everyone that having a backup generator is a necessity for some businesses. The best way to perform a risk assessment is to compile a list of what could happen and how the business can either reduce the risk or handle the consequences. Small business owners can form a support group who can help each other out in the case of emergency. Where can you temporarily set up shop if you lose your building? Who can lend you equipment if yours fail? Who can step in for you if you get sick or injured? Who can you bring in if a key employee gets sick or injured? What will you do if you lose your biggest client? Who can you turn to if your biggest supplier fails?

Some of these risks can be managed with insurance so having a good insurance agent and meeting regularly is important for any business owner. Other risks can be managed with the creation of good procedure manuals and lists of passwords, user names, and key contacts in the event of illness or injury to the owner or key employees.

 Make a point to conduct your own risk assessment before the end of 2013 so you can start 2014 knowing your business risks are under control.

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