In business, do you see risks or opportunities? Because the fact is, embracing risk can benefit small businesses. It’s sometimes seen as a boring or dry subject or something that is only relevant for big corporates, but it’s something that every business needs to engage with.
In a fast-paced, engaging session, BizSmart Select Member Zoe Thomson of Risk Evolves covers the ins and outs of risk, and how you can turn perceived threats into opportunities for your business.
Or read on for more details on this topic…
Risks or opportunities
Risk is defined as “effect of uncertainty on objectives” (ISO 31000:2018)
This sounds negative – it sounds like we’re talking about things that could potentially knock your business off course. But the key point to get across is that risk in business is not just about negatives. Risk can represent opportunities that small businesses, in particular, may be better positioned to exploit.
Impact of risk
It’s important to look at how likely it is that your business will be exposed to a particular risk, and what the impact would be if it did happen.
Uncertainty may centre around areas such as managing the organisation or changes in the marketplace.
- Variable cost or availability of raw materials
- Cost of retirement/pension/social benefits
- Increasing importance of intellectual property (IP)
- Greater supply chain and joint venture dependency and complexity
- Reputation becoming more important and more vulnerable
- Regulatory pressures and legislative requirements increasing.
Why should a small business owner know their risk profile?
It’s important for you to know the risk profile of your business, but if you’re running a small business you may never have looked at this. So why is it so important for you to be aware of the risks or opportunities in your business?
You’ll want to be able to see where uncertainties could have an impact on your business, and look beyond the initial cost. For example, you’ll want to avoid regulatory fines, but it’s not just about the financial cost. Fines will clearly have an impact, but the reputational damage may be more costly.
Key areas of risk
You’ll want to identify key staff, skills and suppliers, core processes and pivotal points in production, along with threats to your organisation, both internal and external.
The biggest threats or risks are the ones that could give rise to unexpected costs, cause customer dissatisfaction, put you in danger of legal noncompliance, and prevent you from achieving your strategic goals.
Now, these are all “negative” but there are also opportunities within the risks.
Where are the biggest opportunities?
The opportunities will be different for each business, but could include:
- Speed of response to a changing market e.g. build up a local client base to shield your business from rising fuel costs
- Building resilience in a smaller company by ensuring each member of staff can fulfil multiple roles within the business, protecting the business if a member of staff leaves
- Proving compliance within a certain area, e.g. BS 10012 Personal Information for GDPR
It can be challenging to identify risk within your own business so getting someone from outside to identify risks (or opportunities) can be helpful. This could be peer to peer, for example in a Smart Boards session or mastermind group, or you may want to use a risk specialist.
BizSmart aims to help SME and micro-business owners scale their businesses and create value through sound practical business support. We aim to give you insight and clarity and fire up your determination to succeed. You can access blogs like this and more besides through our free SmartRoom service here.