Many successful entrepreneurs are pretty good at intuitive risk management planning. They see a potential problem and head it off.
But to be quite honest, most entrepreneurs end up just flying by the seats of their pants when it comes to reacting to immediate threats. And while we may manage them fairly well, we know we could do better. We know we could benefit from more robust risk management planning.
I believe the most effective risk management planning is deliberate and systematic. It's more comprehensive than simply dealing with whatever each day hands you, and it takes some homework. If you're working toward better risk management for your company, here are a few tips that have worked well for me.
1. Do involve everyone.
Some folks think risk management is solely the job of those who inhabit the C-suite, crunch numbers or handle HR. Not the case!
Sure, your risk management planning may be handled by your upper echelon (whether it's an army or an army of one!), but that doesn't mean that every member of your team shouldn't be involved.
Risk management can come in all shapes and sizes, which means that it's everyone's job. From cleaning up spills to prevent slip-and-falls to safeguarding the company's reputation and ensuring the company's data is secure, it's all hands on deck.
When you make the case to every employee that risk management matters to their job security and the health of the company, you're taking an important first step.
2. Don't ignore the obvious.
So you've decided to roll up your sleeves and tackle risk management planning for your business. I say good for you! Seriously!
One thing I've observed, though, is that it's easy for risk management newbies to fall down the rabbit hole of trying to anticipate risks that are, quite frankly, uncommon and unlikely. That's not to say that uncommon threats are irrelevant. But I think it's far wiser to plan for the risks that are much more likely to occur.
Once you have a sense of how you'll handle obvious threats, your plan can more easily be adapted to address more uncommon threats. If you can manage what you know is likely, you'll have a roadmap for handling the stuff you never imagined would occur.
3. Don't expect perfection.
Of course there will be things that occur that you failed to predict. That's simply the nature of life and business. It's how you react to those unpredictable events that matters.
The point of risk management planning isn't to prevent everything bad from happening. (Wow, it would be nice if that were possible.) The point of risk management planning is to avoid the threats you can foresee and manage the outcomes of the threats you can't avoid.
For example, it's not unreasonable to expect that at some point, your company might be sued by a competitor, an employee or a customer. Sure, you're absolutely going to do your level best to make sure your company dots Is and crosses Ts, but you can be sued for anything, even if it's wholly unjustified.
Risk management planning aims to head off lawsuits, but it also positions you to be able to manage them with minimal fallout. You'll have procedures in place for handling suits, which can help keep your company running and can lead to optimal outcomes.
4. Do track incidents.
Since you can't expect perfection, be prepared to track any events that constitute threats to your company.
If you have to dismiss an employee for cause, every detail should be meticulously documented. If a customer slips and falls in your store, there should absolutely be a thorough incident report. If an employee screws up and makes the company look less-than-fantastic, it should be documented, along with measures taken to repair the company's reputation.
Tracking incidents as a part of risk management planning is both about protecting yourself in the short term and improving outcomes for future incidents. If you can't prevent it, you might as well learn from it. Preparing and approaching risk management both deliberately and comprehensively can help improve your chances of success.
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