When you started your company, you probably weren't thinking about risk management planning. Everything was one giant risk, and every day felt like it was sink-or-swim time.
And while it is incredibly risky to start a new business, risk doesn't end once you've nurtured your fledgling company through its infancy. You may feel like you can finally take a breath, when in fact, risk management planning can become even more important as your company grows.
Growth = Evolving Risks
Risk, like stress, isn't always a bad thing. Stress can spur you to perform better than you thought you could, and risk can bring great reward.
But like stress, risk must be managed. When you started your business, you may have been risking just your reputation and your startup cash. But once you've started to grow, there's a whole lot more on the line. As your risks evolve, your risk management planning will need to evolve as well.
If you're reading up on risk management planning, you're smart—getting a sense of the kinds of risks that threaten your business and the strategies for coping with those threats can be empowering. But it can also be intimidating. You have legal risks. Is your business compliant with every applicable regulation? Are you sure? You have risks that relate to the security of your data, and financial and strategic risks.
As your company grows, as you employ more people and reach out to customers in new places, the rules and risks will be different. It's important that you realize your risks will change (and maybe even grow) as your company grows.
One of the best ways to grow your business is to do it deliberately and with specific goals in mind.
Rather than saying “I want to make more money," put your goals into SMART (Specific, Measurable, Achievable, Relevant and Timely) terms. With SMART, your goals might look more like: “By the end of our fiscal year, I want to open a new location," or “Let's focus on increasing revenue by 25 percent with our top three clients."
What does clearly identifying goals have to do with risk management planning? Without SMART goals, I think it's far more difficult to assess and manage risk. By articulating your goals, you're opening the door to being able to fold risk management into your planning and strategy sessions.
I think risk management should be part of your big-picture outlook. I've learned that if I make sure risk analysis is baked into every business decision I make, I'm much more successful.
How does this work in the real world? Say one of your goals is to expand into an international market. Part of successfully launching your new expansion will be managing your brand and its reputation as you enter your chosen foreign market.
Knowing that protecting and promoting your brand is critical to your success can help guide your decision-making process. You've identified a risk—that your new market either won't know your brand or won't have positive associations with it. Now you can manage that risk by understanding its impact on your clearly articulated goal and making decisions that take that risk into account. This is how you build risk management planning into everything you do.
I've found that some entrepreneurs assume risk management planning is all doom and gloom. It doesn't have to be! Sure, it's important that you and your management understand that not complying with rules and regulations can be catastrophic for the company. But there's so much more to risk management than simply avoiding a fine or a lawsuit.
If you think about it, growth is inherently risky. But growth can also be exciting. That's where innovation lives. That's where the rewards are. That's why you took a big chance and started your own company, rather than simply being content to cash a paycheck for the rest of your life.
I like to focus on the positive aspects of risk management planning. Let's consider our hypothetical company that wants to enter a foreign market. You know you need to build brand awareness, and in order to do that, you're going to have to take some chances.
Taking risks can make you memorable, and if you don't find some way to make a splash, you may not have customers clamoring for your wares. Managing risk can mean taking action, rather than remaining complacent.
As it turns out, there are risks in doing nothing. By focusing on taking action while evaluating and managing risks, you can position your company for growth. In fact, rather than operating scared—that is, being terrified of screwing something up—sound risk management planning can help your company grow with greater confidence.
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