Practical Risk Management for Small Business Owners and Managers
3 comments
3rd Mar 10
Tom
www.clearrisk.com
I am honored that Craig and his team at ClearRisk Inc. accepted one of my posts for publication in the ClearRisk blog. The post is titled “10 Steps to a SMB Risk Management Process“.
.
Over the last week or so, I’ve been contemplating the information I’ve seen on the web about business risk management. Read the rest of this entry »
15th Feb 10 Tom
If you’ve been keeping score at home, you’ve noticed that I’ve used the word ‘formal’ quite a bit. In fact, in one poorly worded post I suggested that “the (risk management) process doesn’t have to be formal” and got called to the carpet in a comment by Kristen. She was absolutely correct in stating that the process really does have to be formalized – meaning performed consistently and methodically – but doesn’t have to be complicated, expensive or burdensome (a point I attempted, and failed, to make).
.
That exchange was a good example of how the word ‘formal’ can be misused or at least have different meanings to different people. In my last post about cost benefit analysis, I was again throwing around the f-word (no, not that one…) somewhat carelessly. Let’s take a step back and explore what really characterizes a “formal” process. Read the rest of this entry »
11th Feb 10 Tom
What do these decisions have in common?
.
Give up? Read the rest of this entry »
22nd Jan 10 Tom
Let’s drill down a bit into risk evaluation – step 2 in the risk management process. It’s standard practice to evaluate a risk or opportunity’s impact and rank it. You can rank the impact on a scale of 1 to 5, with 5 being the highest impact. Or you can rank the impact “high”, “medium”, or “low”. Or if you’re utilizing financial models you can calculate the risk’s impact and represent it in terms of your local currency.
.
Seems very straight forward, right? It is, but let’s take a step back and ask “Impact on what?” Read the rest of this entry »
7th Jan 10 Tom
Over the last couple of months, I’ve walked through the process for small business risk management with you. I thought it would be a good idea to capture all of the “how to” posts in one place.
.
Take a look at the compilation. My hope is that after reading all the posts below you have a general understanding of how to manage risks and opportunities for your small business. More importantly, I hope you see the benefit of incorporating formalized risk management into your daily business life.
4th Jan 10 Tom
It’s been a while… Let’s get back to basics of the risk management process.
.
We’ve covered the first two steps – identifying risks and evaluating them. You now have a great list of your risks and opportunities, in order of their potential impact on your business, but your work isn’t done yet. Having the list helps you anticipate which risk may have the biggest impact on your business, but if the risk becomes reality you will still be reacting to it during a potentially stressful situation.
.
Since clear, thoughtful thinking is difficult during a crisis, let’s do some thinking now about what we would do. This exercise is called risk mitigation planning. Believe it or not, this is the fun part of risk management. Read the rest of this entry »
30th Dec 09 Tom
Let’s take a step back for a minute. Step one of the risk management process is “Identify your risks”. Three little words so it must be pretty easy, right? Not really.
.
A risk management plan is only as good as the risks you identify. They need to be specific. They need to be the ‘root risks’ or the root causes of those potential hazards (or opportunities, remember) facing your business. As you start drilling down into all of your assumptions you’ll find that it is hard to get deep enough. It’s hard to go far enough down into the details without getting derailed on meaningless tangents.
.
To help out the process, I’ve developed a technique I call the “5 Coulds”. I can’t claim this technique as original work. It’s based on a root cause analysis technique called the “5 Whys” that is used in process improvement and the Toyota Production System. Read the rest of this entry »
14th Dec 09 Tom
In our last conversation about risk management how-to’s, we finished up the discussion on evaluating risks. If you are able to utilize some sort of financial model to estimate risk impacts during your evaluation, you now have a rather lengthy list of risks with their probable impacts. That list can now be sorted.
.
How you sort the data depends on your desired approach. You can sort the data in order of probable impact. (This sort order will put the risks with the greatest potential impact to your business at the top of the list.) Or you can sort the data in order of probability of occurrence. (This sort order will put the risks that are most likely to occur at the top of the list.) Each sort order has its benefits. Personally, I look at the data in both ways. I obviously want to deal with the biggest impact risks. But I also want to deal with the most probable risks. Call it selfish, but I like the idea of reducing my future stress levels by eliminating the most probable risks.
.
So we’ve got a sorted list of risks. It’s probably somewhat overwhelming. There is no way you can deal with all of them. Where do you start? Which risks do you work on and which do you leave alone? That’s where the 80-20 rule comes in… Read the rest of this entry »
6th Dec 09 TomFirst off, let me apologize for the inconsistent posting lately. The holiday and vacation really hosed up my editorial calendar…
.
So let’s get back to evaluating risks. In the last post, I introduced you to the first two steps in risk evaluation: estimating probability and estimating potential impact. The last two steps are calculating probable impact and testing sensitivity. Read the rest of this entry »
1st Dec 09 TomIn Part I of this series, I described the outcomes of risk evaluation. (It got a little long. Sorry.) In this post, let’s start digging into the individual steps.
.
Evaluating your identified risks involves 4 different activities. As you will see, it’s a lot easier to do the evaluation if you are working in a spreadsheet or some other computer based application. Here are the four steps, in order:
RSS
