Take a step back to think about the risks
Business owners are so busy juggling the daily challenges of managing their business, suppliers, clients and staff that they often fail to take a step back and assess the various risks that they face.
This is according to Gerrie van Biljon, Executive Director of Business Partners Limited, who says that while it is not very pleasant, in the midst of this juggling, to dwell on the negative incidents that can still go wrong, the simple act of thinking about these, and the mere awareness of it, can mean the difference between success and failure.
“In our daily dealings with small and medium enterprises (SMEs), we have seen setbacks within businesses as a result of disasters that have struck throughout the years, namely external disaster such as floods, power outages and new legislation. But there are also internal business risks such as computers crashes, new competition, strikes and new innovation.”
While it is important for business owners to deliberately set aside time to assess the risks facing their business, they also need to be aware of key areas within their business that could potentially be affected as a result of these risks, says van Biljon.
“Business owners need to accept that they cannot think of everything and instead need to concentrate on the basics. These include fire, theft, accident, loss of key personnel and loss of data. By listing the basics and spending time considering these risks in the context of the business, they have already done more than many other business owners, and have awakened a crucial awareness.”
Van Biljon however advises against undertaking the exercise alone as this may lead to significant aspects being left off the list of possible risks which face the business. He recommends that business owners approach any large corporation that they deal with, either suppliers or clients, and ask how these parties consider risks. Where possible he advises that business owners use experts to assist.
“Risk management is a fairly recent discipline in the corporate world, but most large organisations have undergone at least a few formal risk assessment processes. Knowledge of the approach to risk is therefore relatively widely spread in those organisations and a sympathetic contact on the inside could be willing to help with some pointers.”
He adds that ideally, business owners should contemplate each of the set of risks one by one, prioritise them according to how likely they are to happen, and put precautions and contingency plans in place. “For example, most business robberies happen after the perpetrators have scouted the premises by gaining entry under some pretext, such as pretending to be looking for someone. By installing some form of access control, a business can dramatically lower its chances of being burgled.”
He adds that risk assessment is unfortunately not simply something that a business owner can do once to get it over with. “Risk assessment is an exercise that needs to be done regularly as a business’s risk changes constantly, not only because of changes inside the business, but also because of changes in the environment around the business.”
Some of these risks can be countered, or at least the entrepreneur would be aware of the possible risks, says van Biljon. “A strategy or a back-up plan can be instituted and where possible insurance should be in place.
“Insurance experts could assist a business owner with a general risk assessment that will protect the business against inadequate or inappropriate cover. It is however imperative that the business owner selects a reputable and knowledgeable insurance broker to minimise the risk as it is certainly possible for a business to be over-insured, and insurance is only a small, if crucial, part of risk management.”
He says that even if few business owners get around to implementing regular, formal risk management processes, it is important to adopt awareness and an approach to business that takes risks into account. “It comes down to the survival of the cleverest. The cleverest business owners learn from setbacks of others. Average business owners learn from their own setbacks, and the foolish never learn; neither do they last long in business,” concludes van Biljon.