By Rieva Lesonsky
In the aftermath of Hurricane Sandy, who isn’t taking a good look around and wondering what they would do in such a situation? What will the small businesses affected by Sandy do? Will the cost of rebuilding wipe out their working capital? Will they have to get a new small business loan to start over? Are you prepared if a natural disaster were to strike your business? What risks do you face in your personal and business life?
small business Owners can never be too prepared. Here are four steps to a comprehensive risk management plan:
- Identify. Name all the possible risks in your company you can think of and then brainstorm more with your employees. Include safety risks, computer security risks, natural disasters, proprietary information loss, negative company image, employee theft and more. Make a list of all the reasons risks could occur (everything from a bad Yelp review to hurricanes, tornados, earthquakes or floods).
- Measure. For every risk, name the impact of the risk. Is it a small impact (loss of one customer) or a large impact (bankruptcy)?
- Respond. The extent of your response to the risk depends on the level of impact. You might want to accept the risk if the impact would be miniscule. If the risk is on a larger scale, however, you should put systems in place to avoid the risk, or transfer (or share) the risk (for example with another company), cover the risk (that is, get insurance) or take actions to lessen the impact of the risk.
- Monitor. Assessing your risks is not a one-time checklist. It’s important to set up a schedule to reevaluate your risks on a regular basis. You need to assess risks at least once a year, but you should also do so every time you make a major change in your business, such as expanding to a new location, adding a new product line or adding a new sales channel. As you make these changes, some risks may lessen, and new ones may appear.
As the business world continues to integrate technology into every business process, small businesses are more and more at risk in areas such as stolen or compromised customer data or sensitive information. Before you implement any new technology make sure you assess and plan for the risks involved so you don’t expose your business unnecessarily.
Rieva Lesonsky is CEO of GrowBiz Media, a media and custom content company focusing on small business and entrepreneurship. Email Rieva at firstname.lastname@example.org, follow her on Google+ and Twitter.com/Rieva and visit her website, SmallBizDaily.com, to get the scoop on business trends and sign up for Rieva’s free TrendCast reports