There are many sources of business risk. It is important that business owners understand there are certain risk events that can be controlled and some that cannot. Changes in government legislation and environmental impacts—floods, droughts, fires—are examples of risk events outside your control. Operating a business free of risks is limited to managing risk events you can control.
Minimising business risk
Identifying and managing risk is an integral component of building a successful business. It is impossible to remove risk from all situations, but you can manage it. These steps include:
- Identify the risk
- Try to avoid the risks
- Minimise the risk by putting measures in place
- Transfer the risk to someone else
- Manage or retain an element of risk
To minimise business risk, business owners need to implement effective risk management strategies into their business.
This process involves identifying what is a possible risk event, grading the event and then designing a strategy to minimise, manage or remove the risk.
Risk management checklist
To minimise your business risk, start by completing a risk management checklist. Purchasing business insurance is an example of reducing business risk, as is employing suitably qualified people who have experience in areas that are risky, as they can manage it for you.
Outsource your risk management strategy
Your advisor is best positioned to provide you with risk management advice. Every business is different. That’s why discussing your requirements with a specialist will help you develop a tailored risk management strategy for your business.
For more information on Risk Management, click here.