Tips for managing small business risk

Risk is a fact of business life. Understanding where risk lies allows you, as a small business owner, to prepare ahead of time and develop strategies to minimize business risks.

To help you manage risk and make decisions effectively, you’ll need to develop a number of skills. Decision-making and risk management can be learned by anyone, but it’s up to you to strengthen them as much as possible.

Things to keep in mind when facing risk

As an entrepreneur, you’ll face unexpected decisions along with routine and planned decisions— it’s important to be able to deal with both. When making decisions, keep these things in mind:

• Have a clear understanding of the decision to be made
• Consider the vision and values of the company
• Evaluate the consequences and outcomes of your decision
• Brainstorm as many alternatives as possible
• Evaluate the pros and cons of each alternative
• Be sure the appropriate person is making the decision
• Understand the timeline in which the decision must be made

I’ve made a decision – now what?

Once you’ve made your decision, you should re-examine it and the effects that it’s had. Avoid relying too much on expert information but ask others for their opinions when it’s necessary. Be realistic when evaluating alternatives and avoid hearing only what you want to hear. Remember the importance of the decision, but don’t focus so much on the significance of the decision that you’re too stressed to make an effective assessment.

Avoid overanalyzing the situation or getting stressed out over the significance of your decisions and actions. Risks should be identified, analyzed, and prioritized to make decisions easier on management.

First, determine the possible consequences that could result, and then develop a list of ways to reduce the risk. You could choose to avoid, reduce or transfer the risk. Mitigate your risks as much as possible by using technological and human resources. For example, you can mitigate or transfer risk by purchasing insurance. Once you’ve evaluated alternatives and decided on an action plan, set out a framework and timeline for your actions. Be sure to include any relevant people when devising a risk management plan, like your public relations representative in a risk involving the company’s image, or your accountant in a risk involving the company’s finances.

We’ll leave you with some good news — when it comes to managing risk, small and medium enterprises are better at it than larger companies!