Thomas M. Bragg on Business Risk Management

Most people think that risk management only deals with the potential bad things that could happen to your business. What a huge misconception. A key outcome of risk management is the identification of your opportunities, too. Very few businesses actively manage their opportunities, but those that do stand out above the rest in terms of growth and profitability. If you put just a little bit of effort into it, you can join the ranks of the best managed businesses.

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As I wrote a while back, businesses make a lot of assumptions. Almost all assumptions are wrong, which means that the actual result may potentially be worse than the assumption (a risk) or may be potentially better than the assumption (an opportunity). Opportunities can be identified and managed in exactly the same way as risks…

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Think about that. Opportunities can be managed in exactly the same way as risks. That means opportunities can be identified, evaluated and planned for. How awesome would it be to have a prioritized to-do list of ways to improve your business? Pretty awesome right? We can make it happen…without doing anything more than the normal risk management steps.

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I’ve already written about how most risks are based on assumptions – conscious assumptions or unconscious assumptions. Most opportunities are based on assumptions, too. For example, you may be assuming a certain raw material or wholesale cost for your product. The risk is that the cost is higher than assumed. But the opportunity is that the cost is lower. The question is how can you make that happen? Another example: A competitor moves in down the street. The obvious risk is that the competitor takes away some of your business. But what if you step up and beat the competitor? What a great opportunity to create word-of-mouth advertising and a great reputation.

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Good managers are constantly looking for opportunities. Seth Godin (Seth’s blog) and Jeff Cornwall (The Entrepreneurial Mind) both recently wrote about the importance of watching for opportunities.

Seth wrote:

As you get bigger and older, are you busy ensuring that a bad thing won’t happen that might upset your day, or are you aggressively investing in having a remarkable thing happen that will delight or move a customer?

Jeff wrote:

The most successful entrepreneurs are not necessarily those who write the best business plan. What successful entrepreneurs are good at is listening to their customers and then adjusting appropriately.

Both are talking about looking for opportunities.

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So here’s the point. As you’re brainstorming on all of the risks facing your business, include the opportunities as well. For each risk category and assumption ask yourself “What is the potentially good thing that could happen to my business?” Opportunities are every bit as important to the future of your business as the risks.

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So how are you doing? Feeling overwhelmed or kinda getting the concept? Hang in there. We’ve covered the basics of the first step of the risk management process: identify your risks (and opportunities). Coming up: evaluating your risks and opportunities.

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What can I do better to help you out? Post a comment of contact me on the Contact Me page.