Running a small company can be risky business, but a risk handling plan can be a lifesaver for business owners. It provides a structured method for addressing risks to your business, and a process business owners can use to identify risks that could affect their operations.
There are various types of risk management strategies, such as risk assessment plans, that can be implemented by businesses of any size and in any industry. Generally speaking, risk management works best when it is an ongoing process, rather than a series of steps.
Developing a risk mitigation strategy, which often includes several types of business insurance*, that can help business owners make better informed decisions and operate more securely and confidently. Risk management is considered essential for many businesses, regardless of their size or industry.
New and ongoing risks should be continually assessed, managed, and monitored. This approach provides scope for the process to be reviewed and updated whenever new developments occur or when taking additional steps to protect your business, its people and its assets.
Why is risk management important?
Effective risk management allows businesses to efficiently respond to potential issues before they escalate. By identifying and addressing risks proactively, companies can minimise disruptions to their operations and protect their income. This approach can also keep businesses resilient and supports sustainable growth and stability.
Steps to create a risk management plan
A common approach to risk control mitigation for small businesses will generally include four critical steps:
1. Identifying your risks
Carefully review your business to identify potential risks by evaluating each function in your business and identifying anything that could negatively impact your business and workshopping with your staff.
2. Assessing your risks
Assess the likelihood each identified risk occurring, and the impact it would have on your business. When assessing your risks, consider:
- introducing a mission statement, written goals and defined objectives;
- assessing risks at company-wide level;
- assessing risks at the process level;
- completing a business control form for each significant activity in your business; – prioritising activities that are most critical to the success of your business.
Ensure that all risks are identified and addressed.
3. Manage your risks
Three effective ways to manage business risk are:
Avoid the risk: Change your business processes, equipment, or material to achieve a similar outcome but with less risk.
Reduce the risk: If a risk can’t be avoided reduce its likelihood and consequence. This could include staff training, documenting procedures and policies.
Transfer the risk: Transfer some or all of the risk to another party through contracting, business insurance, partnerships or joint ventures.
4. Monitor your risks
Risk monitoring involves regularly reviewing your business processes and adjusting your strategies as needed. This helps you protect your profitability and catch new potential threats early on, before they can impact your operations.
Running a small business can be challenging, but BizCover can make it easier when it comes to reducing your exposure to business risks and avoiding the worst of tricky situations. Compare competitive business insurance quotes for Public Liability, Professional Indemnity, Management Liability and more from leading Australian insurers and get covered fast. Call us on 1300 249 268 if you prefer to chat.
