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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About a week ago we talked about how to identify your risks. I asserted that “almost every risk comes from assumptions” and we, as business owners/managers, make A LOT of assumptions. Where do we start?

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It may be helpful to think about all of those assumptions and associated risks by breaking them down into 3 broad categories.

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1. Budget (financial) Risk
2. Schedule (calendar) Risk
3. Quality Risk

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Let’s take a brief look at each of them…

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My friend Jill and I were talking about the business risk management book I’m working on. Jill consults with small businesses and was saying how many small business owners are hesitant or even resistant to planning. Many just don’t feel that they have the time or are intimidated by the process and the required effort. “Why should they care about risk management, Tom?”, Jill asked. It’s a very good question.

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In my mind, there are 5 reasons a business owner should want to learn about and practice business risk management. By implementing business risk management, you can:

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1. Avoid bad things that are likely to happen to you.
2. Minimize the consequences of bad things that you can’t avoid.
3. Identify and take advantage of opportunities you may not see.
4. Do more than just insure against a few risks, with little or no added expense.
5. Join the best-run businesses.

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Let’s briefly talk about each reason…

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Risk management is arguably one of the most under-utilized business tools available to owners and managers today. It involves planning for potentially bad events before they happen. Risk management is a technique for predicting what unplanned events might occur and what the impact of those events might be. It’s also a technique for pre-planning how those events can be avoided or how their impact can be minimized. Almost every business does a limited amount of risk management – usually in the form of insurance – but very few businesses actively manage their risks.

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So what kind of risks am I talking about? They run the gamut. The insurance I mentioned usually deals with financial risks associated with natural disasters, fire, injury or death, accidents, etc., but there are many, many more risks facing your company.

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As I was contemplating my first blog posting (and wondering what I had gotten myself into), a blog entry from Seth Godin showed up in my reader and provided some inspiration…

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This blog is going to be about incorporating risk management into the every day life of business. I commit to do my best to engage you and be engaged. I will strive to earn your trust and trust you. I will endeavor to write things that you may want to pass along and discuss with others. I am honored to have the opportunity to teach you something every now and then and perhaps lead you into some new beneficial behaviors.

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My name is Tom Bragg. I believe that risk management is an activity that every business should perform  on a regular basis. It’s not as scary as it sounds. I can help you understand how to do it and why it works. We can get it done with only a little effort. Will you join me?