Managing risk, part 1

Nothing is life is without risk, and business is no exception. The risk level, however, does vary among industries. And unmanaged risk costs money. Did you know that small businesses incur in excess of $160B in liability annually? The good news is that risk can be managed, and you don’t have to spend your hard-earned revenue paying for liabilities that could have been avoided.

Identify your company’s biggest risks. A big risk is a risk that could cost your company significant liability and is likely to occur without mitigation. That is where the time and energy mitigating risk should be spent.

How do you identify those risks? Take a deep look at your operations and how you run your company on a daily basis. Map out the activities. For example, if you operate an automatic carwash, you take the customer’s payment, you have an attendant spray the car down, you guide the driver to the tracks and the car moves through the machine. You likely have a certain wash solution that you purchase from a supplier.

It’s possible the car wash attendant could slip and fall. It’s also possible a car could be damaged by some component of the car wash. It’s possible your supplier is unable to deliver the wash solution, and you are unable to open the car wash as expected. If you have customers that pay a monthly fee to use the car wash, they may feel as if they are not getting the full benefit of their investment and request a refund for the month.

Of all the possible things that could go wrong, you have to determine what’s most likely and most costly. That’s where you focus your attention.