Risk is one of the most overlooked areas in small businesses in spite of the fact that it is clear to most small business owners that operating any business involves risk. While taking a risk and winning is fun, prudent business owners take care to minimize the risk, just as you would in any other type of risky venture you undertake. A good risk management system is a continuous process of analysis and communication.
A search for risk management on the internet turns up a very diverse set of links, none really addressing comprehensively the risks a business should consider. Some topics that surface are insurance, environmental issues, OSHA standards, financial safeguards, security services, backup systems and government regulations - all of which are valid risk control systems, but are specialized areas for consideration. Part of the difficulty is that each business will have different types of risks, so it is difficult to generalize. Insurance covers the ones that are most common. Specialized insurance for particular risks that are inherent to your particular field of endeavor is also available for some businesses. However, insurance is only part of the package you as a business must consider. Contingency planning for other potential hazards is just as important as insuring against losses.
Sloppily thought out risk management plans are almost as bad as none because they can be time consuming with no long term benefit. One business backed up its data from its computer on a date storage device and stored the device in a nearby vault. The vault was closed and sealed when they left for the night. When the toilet water main broke during working hours and water rushed into the whole floor of the building, the vault filled with filthy water just like every place else. The computer operator only had enough warning to flip off the electricity. The computer was a loss and it took months to recover the data lost. The company had a contingency plan for a corrupted database, they just were not ready for a flood disaster. While there is always something that unanticipated that can happen, planning for the worst case will help you through many a bad moment.
You prepare for marketplace risk through your business plan. In the same way you need to prepare for the risks of illness, disability, damages, losses, injuries, and even disasters. A good risk management system not only has adequate insurance coverage to compensate you for losses which might occur, but it also includes a plan to prevent losses, if possible, and to manage unexpected events as they occur.
More on risk management:
Setting Up a Risk Management System
Risk Management Tools
