Key Learning Outcomes

  • Recognise that there is risk in everything we do in life and the key is to manage it.
  • Learn how to identify and measure the risk factors in your business plan.
  • Look for areas that could hinder your success and work to find solutions and adopt control measures.
  • Understand both the internal and external risk factors for your business.

Article

Every day when we wake up and walk out the door there is risk involved, and whether we are conscious of it or not, most of us weigh up the risks before doing something. So when crossing the road, the worst possible outcome would be getting run over. Our natural instinct is to minimise the risk by not crossing the road while the traffic is moving fast; we either wait for a break in the traffic or use a crossing. Next time you cross the road, even at a set of lights, watch yourself; you are likely to still look both ways prior to stepping onto the crossing. You do this as it further reduces the risk that you will be run over even though the sign says “walk”.

In business, we need to think in much the same way and consider the risks. We need to think about each one in terms of the likelihood of occurrence, and the impact that it will have on the business and your ability to achieve your goals and objectives. In large businesses there are entire departments with specialists dedicated to weighing up the risks of various decisions and projects. In a small business we do not have this luxury; however, that does not mean it is less important to analyse the risks.

There are many complex management tools and models used to identify and mitigate risk. We recommend you use a simple matrix that helps to identify the risk along with what measures can be taken to reduce the likelihood or the impact. When thinking about risks, you need to consider both internal and external factors. While it may seem negative to think about what might go wrong, the thought that goes into this section is likely to save some heartache down the track.[wlm_ismember]

To complete your risk analysis, use the worksheet provided. You will see there are four columns. The first is the risk factor broken up into operational and financial risk factors. You then need to assess the likelihood of each factor occurring, and we look at these as low, low/medium, medium or medium/high or high likelihood, and the same for the impact on your business. If you have a risk factor that is high in likelihood and high in impact, then you need to address it as a matter of urgency. Something that is low likelihood but high impact needs awareness and monitoring, and something that is low likelihood and low impact is not of immediate concern. You then look at the control activities that you can put in place to minimise either the likelihood, the impact or both. If we look at crossing the road as an example, the risk is that we could get run over. The likelihood is low if we implement the control activities of using the crossing and looking both ways, but the impact would be high.

Critical-Risk-Analysis_01For our case study business, The Best Beauty Salon, there are a number of risk factors that need to be taken into consideration in the business plan.

Critical-Risk-Analysis_02Once you have completed the risk analysis, you have all of the components required to create your business plan. The final learning article, the business plan summary, will outline how to do this and includes some tips on how to get the most out of the hard work you have put in.[/wlm_ismember]

[wlm_nonmember]Would you like to see the whole article?

OneDollarOffer

Would you like to start driving positive changes in your business? Would you like to see increased productivity and profitability? Of course you would!

As part of our commitment to being a low cost yet highly effective service to help owners and managers of small to medium sized business, we are now offering the first month of your membership for just $1! This means you will get full access to all of the learning articles, tools and tips that our website has to offer and with a commitment to upload at least another 150 learning articles through 2015 there is also plenty more learning on the way. On top of this you will also receive our weekly newsletter to keep you updated on new learning for the week and much, much more!

You can cancel at any time, however, if you see the value in what we’re offering (and we’re sure you will!) your membership will automatically continue after your trial at the low cost of just $19.95 per month. So what are you waiting for? For just $1 you are getting full access to all of our content for 30 days risk-free, so come on and join our community today![/wlm_nonmember]

 

Success is giving it your Absolute Best!