Most business owners are optimists! That is why they went into business in the first place.
However, being optimists, many business owners don’t consider the risks that can threaten the very existence of their business, and as such, their own and their employees’ financial well being.
The purpose of this blog post is to get you, the business owner, thinking about the very things that could occur and the impact of these events on your business.
Alan Weiss, a respected American business consultant talked about managing risk and how to assess it. This was simply to:
- Identify each risk
- Assess the likelihood of the risk event occurring
- Assess the financial and other impact of each event on the business
- Put in place steps to mitigate the risk of each event occurring, whether it be the actual event occurring or the financial impact on the business if that event occurred.
So, what are the types of events that could occur that could threaten the viability or future of a business? This will vary for different businesses in different industries. However, some examples may be, not necessarily in order of any importance:
- Fire or flood
- Employee theft, including theft of goods, cash or intellectual property, such as customer lists
- IT breakdown – including computer crashes and computer viruses
- Breakdown of key equipment
- Resignation of a key employee
- Death of an owner or key employee
- Workplace accident resulting in serious injury or death of an employee
- Movements in exchange rates if importer or exporter
- Insolvency of a major customer
- Loss of a major customer/s
- Loss of a major supplier/s
- Major disruption in your industry, such as experienced in film processing, buggy whip manufacture, typewriters and video stores
And the list goes on!
We strongly suggest that you take the time to brainstorm the potential disaster events that could impact on your business and put in place plans to minimise the chances of an event occurring, minimise the financial impact of these events and steps necessary to recover should an event occur.
Steps to minimising an event occurring might be to:
- Review the operating procedures in the business, putting in place the necessary checks and balances. Ensure these are being followed
- Ensure business has appropriate HR management processes in place such that team members feel engaged – a good culture is critical to business success
- Ensuring that an appropriate OHS procedures are in place
- Having appropriate insurances in place, including business interruption/loss of profits, property, equipment, public and/or product liability, death and disability and income protection – and reviewing these on a regular basis eg annually
- Ensuring there are IT back up procedures in place, with back ups kept off premises. Backups regularly tested to ensure that they are working. Note: Cloud based products provide for this in many cases
- If there are business partners in a business, having proper partnership/shareholder and buy/sell agreements in place
- At least annually undertake a strategic review of the business, including an assessment of the industry structure in which the business operates. This may identify trends that the business needs to adapt to.
- Have a credit management policy in place
- Have a business plan that is reviewed at least annually, linked with the strategic review above. This doesn’t need to be a thick document – it may be simply one page.
- Having a customer and supplier nurturing system such that regular contact is made with key suppliers and customers
- Legally separate private/investment assets from the business and from potential claims against the business
- Register interests in assets under the Personal Properties Securities Register
There are many other strategies that could be identified and employed. The purpose is of this blog is not to be all inclusive, but to get you thinking and acting.
There are many resources available on google under disaster recovery planning. Your starting point may be to look at these and then start your planning, assessment then implementation.
Don’t delay – start now!