Financial Data
Updated 30 Mar 2020

Business doesn't have to be risky

Insurance, or risk cover, is one of a business owner's least favourite expenses. It is also one of the most important. But risk management is about more than just policies and monthly premiums.

12 January 2009  Share  0 comments  Print

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Risk is an ever-present reality of doing business. In itself it is not a bad thing - it is essential to progress and failure is often a key part of learning. It is an inevitable aspect of growing a new company or getting a new product to profitability.

The trick, however, is to assess every area of your company, identify potential hazards and known risk factors, and then decide how you'll deal with them if and when they happen.

Typically, risk comes from the following areas of business:

  • Finance (eg, poor cash flow, bad debt, exchange rate).
  • People (loss of key staff, inadequate skills or training).
  • Technology (technical failure, loss of data, security).
  • Changes in the market (disruptive technologies, a shift in customer needs).
  • Growth of competitors (new competitors or competitive products/services).
  • Natural disasters (companies with all their resources in one place are at more risk than one which has branches spread across different regions).
  • Social threats, eg, terrorism (loss of life, property/equipment, loss of business).
  • Loss of utilities and services (power failure, petrol shortages, no public transport).

In assessing business risks, take a complete view. In other words, consider the present and future, from both a local and global perspective. Remember to pay attention to health and safety problems that could put your staff at risk and reduce productivity.

Check your business for: loose cables; wet, slippery floors; poorly-lit areas; lack of adequate ventilation; improper handling and disposal of chemicals; faulty electrical equipment; unsafe ladders and scaffolding; poorly-designed workstations; lack of sufficient rest breaks; and a lack of appropriate, well-maintained protective wear.

Use the following five steps to guide your risk management process:

  1. Assess continuously what can go wrong.
  2. Determine what risks are the most important.
  3. Implement strategies to deal with those risks, including a back-up plan.
  4. Test these plans and strategies.
  5. Train your staff to constantly monitor the top few risks.

It is estimated that with no tested plan in place, up to 86% of small/medium-sized businesses fail within three years of a major incident. Have a proper contingency plan in place and allocate the necessary time, staff and funds to prepare for the possibility of emergencies.

Recovery: conducting an inventory

Be ready to react quickly in the face of disaster - regardless of the cause:

  • Make a preliminary list of all damaged property and the degree of damage to each item.
  • Check this list against any list of property and possessions you may have made before the disaster occurred.
  • If a pre-disaster inventory list was not developed, make one from memory and observation as soon as possible.
  • Take photographs, videos, etc, of the damage.
  • Draw floor plans and sketches of your business interior. Repeat this process in two to three weeks. You are likely to remember additional items.
  • Collect all available receipts, cancelled checks, credit card statements and invoices to prove the value of lost possessions.
  • Do not consider your list final, you may remember additional items later.
  • By conducting an inventory you are making sure your insurance company pays you fairly for all covered property and possessions that were damaged or destroyed in the disaster.
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