Risk management sounds like something that only large companies need to worry about and for tradies who start their own small business, it’s often the last thing on their minds. However, risk management is actually quite simple and means that you’re prepared if things go wrong.
For effective risk management, follow these five simple steps and you’ll find yourself more able to manage any risk issues that come your way.
1. Preparing a risk management plan
The first step is to put aside time and resources to formulate a risk management plan. Don’t make the mistake of rushing through and thinking up one or two risk scenarios in your head. Remember, a good risk management plan can reduce the legal and financial consequences that could occur.
2. Identifying risks
Spend some time identifying all the potential risks involved in your business. Break it down by looking at each activity you undertake in your business (such as buying equipment, completing work on site and giving advice) and think of the possible risks involved in each activity. Think about things that might have gone wrong in the past or have a chat to people in a similar business to see what problems they’ve encountered.
3. Assess the risk
Once you’ve written down all the potential risks involved with your business, consider the likelihood of each risk occurring and the consequences if it did happen. This will help you decide what risks you need to focus on. If a particular risk has both an increased likelihood of occurring and has serious consequences, these will require most attention.
To make it easier, there are some risk management matrixes available online to help you assess risks that can be found with a simple web search.
4. Risk reduction strategies
Once you’ve identified and assessed your risks, now it’s time to develop cost effective strategies for addressing each risk. There are a number of strategies you can use including:
- Eliminating the risk – Some business activities may need to be discontinued if it carries too much risk;
- Accept the risk – If there’s nothing further you can do to reduce risk as you have already taken steps, you may simply need to accept the risk;
- Reduce the likelihood of the risk occurring – Some risks may be able to be reduced with a change in processes and procedures or additional precautions;
- Reduce the consequences of the risk – Think about what can be put in place if the risk does occur, such as contingency planning or procedures that need to be followed after an incident;
- Transfer the risk – See if the risk can be moved to another party, such as financial matters being monitored by an accountant rather than doing it yourself.
5. Ongoing review
Businesses change and therefore your risk management plan needs to be regularly reviewed and updated as appropriate.
Many of the risks associated with small businesses can be addressed simply by taking out appropriate insurance, such as Public Liability Insurance. Speak to your insurance broker to find out more about the best insurance package for your small business.
For help with insurance for your business, contact All Trades Cover or fill in our easy online form.