| Risk management is a vital component of business | | | | Having clearly understood what is going on, effective |
| management training and good management practice. | | | | people in business are able to make a realistic |
| Effective risk management is one of the most valued | | | | assessment of the potential business risks. These |
| qualities of good leadership. | | | | threats must be identified in an ongoing, annual cycle of |
| Effective small business owners and managers | | | | analyzing the areas of concern that a business has. |
| understand that risk management should be an intrinsic | | | | Usually, these threats can be identified within the small |
| part of their business culture. Rather than viewing it as | | | | business plan and the objectives and the initiatives that |
| some kind of extra business activity or as a separate | | | | have been spelled out in that plan. An example may |
| program, risk management must be integrated into a | | | | be succession planning. Being able to identify such risks |
| whole of business approach. Risk management | | | | before they occur is the ideal way of reducing risks |
| becomes everybody's responsibility. | | | | from eventuating. |
| To manage risk effectively in the small business | | | | Evaluate the Threat Profile |
| environment, effective and successful business | | | | Identifying the most likely risks involves having a |
| owners have a clearly spelled out risk management | | | | process that prioritizes the risks and measures their |
| model. This model enables all employees to manage | | | | seriousness and probability. Once this overall profile |
| the risks wherever they are in the business. | | | | threat has been articulated, actions can be taken to |
| The five key areas that are in place in the successful | | | | address it. Every successful business puts these |
| small business risk management model are: | | | | processes and analytical tools into the hands of all their |
| Understand What is Going On | | | | employees to ensure that the threats are addressed |
| This element requires all people within a business to | | | | and action plans are established. |
| have an effective way of realizing and understanding | | | | Determine What Needs to be Done |
| the complexity of the problems and concerns that | | | | Once a course of action has been identified, it has to |
| they face, both on a strategic level and on a | | | | be enacted with the proper accountabilities, |
| day-to-day basis, in their business. | | | | responsibilities and due dates assigned for completion. |
| Effective business owners train themselves and their | | | | The possible actions for managing risk include: |
| staff in problem resolution and decision making skills. | | | | - Avoid the risk altogether |
| They inculcate these processes into every facet of | | | | - Reduce the likelihood of the risk occurring |
| their business. | | | | - Reduce the impact of the risk |
| Research and experience shows that in a crisis | | | | - Transfer the risk |
| situation, when managing perceived or real risks, | | | | - Accept the risk |
| people will always revert to what they have been | | | | Monitor and Evaluate the Actions Taken |
| trained in and prepared for. Alternatively, they may act | | | | As with all action plans, once completed, the results |
| out of instinct. This is often not reliable and can | | | | and outcomes need to be watched to ensure that the |
| sometimes lead to disaster. | | | | desired result was achieved. |
| Identify Potential Threats | | | | |