If you have a small business it's likely you've put together a business plan to map out the direction in which you want your business to go. A successful business plan also considers potential risks that could unexpectantly but dramatically alter the course of the business itself. Read more to discover the necessity of a risk management plan and how it can actually benefit you in the planning stages of your business.
Putting together a business plan usually starts with a focus on an action plan that will lead to the operation of a successful business. How to achieve success is naturally what any new business owner should focus on but what about unplanned occurrences detrimental to the business? Catastrophe is not something we assume will happen but a plan for it is still needed.
It is the reality of every small business that there does lurk factors or occurrences that can indeed disrupt or destroy all your previous plans for success.
Included in the planning stages of every small business should be any risk assessment associated with your particular circumstances,
market, or niche. As foreboding as this may seem this assessment simply enables you to identify many 'potential' risks to your business. The purpose of this is so that you can create a risk management plan to minimize, manage or prevent unfavorable events in a rational manner.
Employee turnover, change in industry regulations, theft, natural disasters, consumer demand and cash flow problems are just some examples of potential risk. The existence of these risks you can't change. You can however form contingency plans to address any changes having a negative effect on business.
Put together correctly a risk management plan can not only safeguard but also benefit your business especially during the planning stages.
Below are 3 reasons why you should have a risk management plan for your business:
Creates Greater Market Awareness
Through researching and examining any potential risks to your business you should gain a greater understanding of the market itself. The knowledge and insight you gain through this research can only serve as an asset. This knowledge will come in handy when putting together your marketing strategy or simply sizing up the competition.
There is no such thing as having TOO much knowledge of your market or niche. As in most cases KNOWLEDGE IS KING!
Plans for Preventative Measures
Some but not all problems, if identified beforehand can be avoided or neutralized; therefore they never become an issue. It is findings such as these that allow you to put into place plans to avoid them. Left undetected and therefore unaddressed these same problems could cause immeasurable damage.
Effective preventative maintenance such as this is a key contributing factor to any successful business.
Plans for Damage Control
Some risks even after being identified as potentially harmful can't always be avoided. These same risks offer the potential for significant damage if they do occur. Usually research indicates their existence but also indicates a small probability of an actual occurrence.
The focus here is not so much to avoid or prevent these types of threats since that can't be done. Usually you have little control over their occurrence.
Risks such as these require plans that will minimize the damage. The key is to recognize them early enough so as to implement any plan aimed at discontinuing further damage.
Left unchecked long enough some of these risks can destroy a business. Your intent is to simply stop further damage and quickly. Having an action plan already in place will allow you to do that.
Hopefully you realize that every business plan should include measures that target identifying and managing risks that could damage your business. The hope of every entrepreneur is that theirs will be a successful business. However without the proper risk assessment beforehand you may be leaving yourself susceptible to events that could destroy your business. To achieve success you must plan for it and in doing so attention must be paid to potential problems that could dash your dreams. A little preplanning beforehand can save you a lot of heartache and money down the road.
