Risk Management: Inspiration, Motivation, Preparation

Image by Eustaquio Santimano via Flickr If you’ve been keeping score at home, you know that the risk management process has three basic steps – 1) identify risks and opportunities, 2) evaluate the risks and opportunities and 3) plan for risks and opportunities. However, there is some work that needs to happen before you get into the nuts and bolts of managing your risks. . This week let’s talk about what needs to happen before the process begins. There are some basic activities: inspiration, motivation and preparation. Over the last few months I’ve written several posts dealing with the “pre-activities”. […]

Should You Go Formal or Informal?

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 […]

The Solution to Every Decision

Here’s a Quiz For You What do these decisions have in common? Is it wise for me to invest in new equipment for my business? Should I respond to the irate customer’s email or just let it go? Is the best route turning left, turning right or going straight? Should I have beef or chicken for dinner tonight? Should I wear the blue shirt or the green shirt today? . Give up?

Risk’s Impact on What?

Image by Jayson Ignacio via Flickr 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 […]

How To Manage Small Business Risk

Image via Wikipedia 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.

Mitigate Risks, Exploit Opportunities!

Image via Wikipedia 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, […]

The 5 Coulds Technique

Image by eMaringolo via Flickr 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 […]

The Miracle of the 80-20 Rule

Image via Wikipedia 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 […]

Evaluate Your Risks, Part III – The Last 2 Steps

First 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.