Business risk, or How To Train Your Dragon
Business is all about calculated risk. The key word there is ‘calculated’. In order for a business to prosper in the long term, it needs to identify, quantify and manage the risks it faces. In the mind of the astute businessperson ‘What could possibly go wrong?’ is not a rhetorical question. If it IS used as a rhetorical question, it often heralds disaster in the same way as the words ’Here, hold my beer!’ often herald some kind of pratfall that delights YouTube viewers.
‘What could possibly go wrong?’ is a practical question leading to an ongoing process of identification, quantification and hedging against the risks a business faces. Risks are diverse. They include nasties like regulatory changes, cashflow problems, employee safety oversights, bad debts, operational SNAFUs, market disruptions and natural disasters.
A business that avoids risk altogether might as well not trade at all. But being too gung-ho can be suicidal. Risk management is a balance between these extremes. For example, given enough time an employee is bound to have an accident and sue. But risk mitigation is minimalizing the likelihood of it happening, and thereby reducing the rate at which it does happen. It’s also about being able to demonstrate that all reasonable measures were in place to prevent the accident – litigation mitigation!
Big companies have armies of accountants to manage risk, but how are small business catered for in this regard? The overall principles are the same regardless of the size of the company, so small business owners can scale the ideas down to their own operations.
A good place to start for the small business owner is a course by Operational Risk Professional Robert Burrus, currently on teachable.com. It takes you through an overview of what risk means to a small business, the forms in which risks can present themselves, techniques to manage them, and provides templates for risk assessments. It is also firmly at the affordable end of such courses, which brings it within the budget of event the smallest business.
Robert Burrus is a Business Turnaround Professional with a proven track record in taking companies from the brink of collapse back into profit. He is the author of Business Strategy, A Collective View (currently listed on Amazon) and an Operational Risk Professional who has guided companies like Legal & General, Transport for London and the US Military (Kuwait) on controlling and managing risk.