John Warren, of business growth consultancy Matchbox Associates, a Boost & Co member, offers a five-step process for identifying the biggest risks to your business.
No matter how good our strategy or business plan is, a key factor in whether we achieve business success is the way we deal with uncertainty or risk.
Risks are generally unplanned events that can have a positive or negative impact on business performance, and they can arise from a whole range of internal or external factors. They are defined by ISO 31000:2009 as “the effect of uncertainty on objectives”.
A simple risk management system that identifies and plans for these events can be enormously helpful, and can avoid the need for management teams to deal with risk in a purely reactive way which has the potential to result in crisis management.
The following simple five-step process to developing a scored risk register can be adopted by any business:
- List out significant events that might impact the business. These could include loss of a key customer or staff member, supplier failure, competitor price reduction. They could also be opportunities, such as a significant supplier innovation or customer growth.
- Score the likelihood of the risk arising from 1 to 5, with 1 being highly unlikely and 5 being certain.
- Score the impact of the risk from 1 to 5, with 1 being minimal impact and 5 being potentially catastrophic.
- Multiply likelihood by impact so a risk with likelihood of 2 and impact of 4 would score 8. This will give an indication of the most significant risks to the business.
- Consider mitigation i.e. what can be done to minimise or accentuate the risk to the business, bearing in mind that a risk can be an opportunity or a threat. Mitigation can include taking action either to reduce the likelihood of the risk occurring, or action to reduce the adverse impact of the event.
|Loss of Ops Manager||2||4||8||Identify and develop potential successor|
Once the risk register has been developed it should be reviewed by the management team on a regular basis.
If it’s helpful, categorise the risks according to whether they give rise to an opportunity or a threat and deal separately with those that offer growth potential and those that offer a negative challenge.
It’s a simple and effective tool that hands control back to business owners and allows key issues to be addressed in advance of need.
Boost Business Lancashire has a wide range of support programmes available for businesses looking to grow. To discuss any of these programmes further, contact us on 0800 488 0057.