3 Reasons Small Businesses Don’t Manage Risks

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It’s the last week of 2009 and I owe you a blog post. I know I’ve promised that I will run through the third step of the risk management process – planning for risks – but I want to hold on to that topic until things are back to normal after the holidays. Stay tuned. In the meantime, let’s talk about risk management and small businesses…

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In a recent comment on a Professor Pinch post, I listed three reasons that small businesses don’t practice formalized risk management. In my opinion, small business owners either:

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  1. Recognize the need for risk management but choose to ignore it; or
  2. Recognize the need for risk management but assign it a low priority; or
  3. Don’t recognize the need.

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I’m sure there are some examples of each reason out there in the world of small business, but which one is the primary reason? If I had to bet, I would put my money on #3. I just don’t think the majority of small business owners have been exposed to risk management – what it is, how to do it and what’s in it for them. It’s not an intuitive technique that entrepreneurs just pick up on their own. That’s the reason I started writing this blog – to provide some practical, easy-to-understand information on risk management specifically for small business owners and managers.

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But I’m not the only one. There is a group of us on the Internet that does a pretty good job of describing how to manage risks and why businesses should be doing formalized risk management. Unfortunately, I’m pretty sure we’re not even scratching the surface of the small business audience. (There are A LOT of them out there – here are the stats.) Most small business owners just don’t have time to read blogs or follow people on Twitter. They are too busy trying to maintain and grow their business.

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I would bet that the next most common reason for not doing risk management is #2 – small biz owners recognize the need, but they consider it a lower priority so it is rarely done. Again, most small business owners are busy maintaining and growing. They would like to work on proactive and preventative things, but it’s hard to set aside the time when the here and now demand so much attention…

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In spirit of completeness, I should address reason #1. I don’t think there are many small businesses out there that fall into this category, and frankly I’m not interested in those that do. Now if we were talking about large businesses, I think there are many execs and managers who know about risk management, but choose to ignore it.

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So How Am I Going To Help?

My goals for 2010 include addressing both reasons – #3 and #2. I will be working to reach out to the small business audience more effectively. I want to provide easy to read and easy to use information on what risk management is, what it does, how to do it and why it’s a good thing. I want to take away any perception that risk management is scary. And I want to put the message in as many ears as I can.

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Once the small biz owner/manager understands why risk management is so necessary, we need to help find ways they can implement it in a way that doesn’t scare the crap out of them. Let’s face it. If a formalized risk management process is perceived as complicated, expensive, time consuming or any combination thereof, the small business owner isn’t going to do it. Simple as that. Our challenge is to help small businesses find ways to reap the benefits with incurring all the burden. Not an easy task.

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So I’m asking for your help, kind reader. What are the best ways to get the attention of super-busy small business owners and managers? What are the best channels of communication? Am I off-base in thinking that time demands will be the greatest obstacle to overcome once small business owners understand the need for risk management?

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13 thoughts on “3 Reasons Small Businesses Don’t Manage Risks

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  4. Having been one of those time-taxed, mercilessly prioritizing small business owners at one point, I’d say there are two things that will increase your odds of getting heard:

    1.) Timing – Interruptions suck, but they suck less when they’re timed right. Timing the interruptions to the yearly cycles (taxes, busy seasons, etc.) of a small business, as well as the daily cycles can help you be heard (or at least ignored less)
    2.) Format – stories are the best. Quick, memorable, and easy to relate to. If I ever had to spend too much time figuring out where this incredibly valuable (fill in product/service/practice) fit into my small business, I’d chuck it and move on.

    May your valuable message reach many Thomas!

  5. Great advice, Matt! I hadn’t thought about the annual cycles (taxes, busy season), but you’re absolutely right about them. I was a small biz owner as well, and back in the day nothing “extra” got done during busy season. It stacked up in my ‘to read’ pile. That’s where the “quick and memorable” come in. At the end of the busy season, I’d have a huge stack of stuff to be sorted and prioritized. Quick and memorable got read…others got pitched. Not an ideal situation, but reality.

    So, note to self: Think about timing and keep the stories good.

    Thanks, Matt.

    Tom

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