7 Steps to Minimising Risk in Your Small Business
If you are running a small business, no doubt you’ve got a million things to worry about. Well, we’re here to tell you, you’ve actually got a million more.
Apologies, but risk in business management is half the job and it encompasses a lot of areas. You have to sniff out risks and offset them. For more information, take a look at our guide.
This one should be obvious. If you aren’t an expert in something, consult with experts, especially when it comes to new practices and policies. You are sure to not be aware of every type of risk, never mind every risk the type covers. Think if you are serving food, for example, you’ve got poison, allergies, humane practices, and lots of other problems to cover when it comes to compliance.
Visit trade associations and industry websites to see where the risks are in your industry and research what you need to do.
Manage your finances carefully
If we are being honest, the first piece of advice we could give to small business owners is that your first hire is an accountant. An accountant will pretty much pay for itself down the line. They can go through your finances and see where you are spending too much money, sniff out better alternatives and suggest where you can save.
They’re also good business and risk managers rolled into the one role. You should run any changes to money, which can encompass everything from material to hiring, past your accountant. They can then tell you not only if you can afford it but if the change is worth it. In doing that they’ll need to basically run through the risk management process and before you know it you’ve dodged a bullet.
Improve your security
There is a lot you have to do to keep your business secure, especially today. If you’ve got a lock and key set up, have hired security guards, have a camera outside, etc. you’re only halfway there. A lot of security problems like fraud and theft are happening online. Get to know the concept of data protection for your customers, as it could save you a lot of problems, including fines. You will need end-to-end encryption and a secure network to be sure that customer data doesn’t get into the wrong hands. And at the very least, keep a paper shredder. It’s been the biggest security risk since people started working from home that they don’t shred documents once they’re done with them.
In the meantime, minimize risks by conducting regular security audits so you can point out areas that are high risk.
Conduct risk assessment
Security isn’t the only place you should be conducting risk assessments, however. You need to regularly look at everything from finance to manufacturing and run risk assessments. Not only will risk assessments regularly flag up any potential risks, but you can then make moves to avoid those risks.
The good news here is that some risks are worth focusing on and some are not, but you won’t know which is which without a regular risk assessment. A crack in your premise ceiling isn’t a problem if there’s no water coming through and its pure aesthetic. But if your staff toilet looks like a fountain, that’s a problem.
Diversify your products and services
If you were to speak to a stockbroker, no doubt they’d tell you their best piece of advice is to diversify. Because if one stock is to crash or business to fail, you’ve not lost everything. You still have other stocks to pick up the slack.
The same thing goes for products. You might have this Shark Tank-esque, world-changing product that everyone needs, but products fail for lots of reasons. Maybe the technology isn’t there, maybe there’s bad business management going on, maybe the product just isn’t that appealing to the public, but if you have a range of products on the shelf, you will have plenty of other products selling while this one stagnates. If you think about the biggest businesses in the world, they all diversify. Car brands sell tools and items to the army and airforce, Johnson and Johnson makes everything from talc to “medtech”, etc.
Branch out and you’ll have something to fall back on if your prize pig comes in last.
Know the law
No one is saying you need to pass the bar overnight, but at least do your research on anything relevant to your industry. There is the customer side of the law and the employee and business operations side of the law. It’s very likely that both will be relevant to your small business.
On the customer side of things, or clients if you prefer for a B2B service, there is health and safety, ensuring that products are fit for purpose, aren’t dangerous in any way and are valued fairly. On the business operations side, you have regulations and human rights to adhere to when it comes to employees. Systems have to be in place to ensure that you are creating a safe and welcoming work environment.
But don’t just open up the bill of rights and call it a day. Keep your eye on the news. A lot of different things can influence your business. You should look out for anything that might potentially affect your business industry. For example, if you were to sell oil, you’re going to be very interested in any wars going on due to sanctions. But there are other matters like anything printed in the finance section, including cost of goods or demand as inflation goes up. And then there are the social issues, which might cover inclusion from the LGBT community, minorities, etc. Some might have to do with salaries, overtime, etc. A change in policy might be written into law, which you will then have to enforce in your workplace.
Ensuring that you are at least aware of these issues will mean that you can get a jump on it when things get serious.
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