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Four Methods for Indentifying Business Risks

October 16, 2013

This October, in conjunction with Cyber Security Awareness Month, we want to present a series of posts on different topics regarding Risk Management.  Let’s start by defining the term Risk Management as a process used to identify, analyze and address potential loss exposures.  Risk Mgmt Pic

Performing a analysis of risks facing your business can seem daunting depending on the size of your business, the complexity of operations, and number of employees – but forewarned is forearmed.  Not being aware of a vulnerability can prove more expensive than the cost to identify and safeguard against it BEFORE disaster strikes.

To that end, we’d like to offer four tools to get started in building a system to identify risks facing your business.

Interviews

Talking to key personnel involved with every level of your business’ operations may provide insight into issues not readily apparent from the top. Asking employees what hazards or contingencies might make their jobs difficult gives them a chance to voice their concerns. Such insight can prove unexpectedly valuable.

Inspections

Regular in-person surveys of your business operations can reveal safety hazards and property loss exposures that interviews and written reports might not.

Flow Charts

Mapping out key processes (steps in production, supply chain links, etc.) on paper visually identifies critical dependencies, bottlenecks or other types of organizational “hotspots.” Illustrating vital processes in chart form highlights what equipment, personnel or other resources your business depends on most, which helps with contingency planning and knowing what to insure.

Financial Statements

Analyzing your company’s financial statements is useful for getting a sense for how resources flow in and out of your business. Identify the types of suppliers on which you are most dependent and the classes of customers that provide you the most revenue.  The result: recognizing key business relationships of particular concern. Additionally, you will be able to identify the types of capital in which your business is invested. Identifying and insuring your company’s real property, inventory and equipment can help protect these investments in the event of loss and provide funding to replace critical assets to get you back on your feet.

Every business should have some type of plan to eliminate unacceptable risk, control unavoidable risk and mitigate loss exposures.   Different businesses call for different assessment approaches or include a mix of those suggested above.  This list is not exhaustive but these tools will help you begin and convince you that it is not impossible to implement a Risk Management program, rather it is a necessity – regardless how big or small your business is.

Thank you for reading and following this week’s post.  Check back next week for our case of study of implementing a Risk Management program into a small business environment.

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