As every news bulletin reminds us, no business is safe for long. Even putting the financial crisis to one side, the safest business can be shaken by the emergence of a powerful competitor, shift in customer demand or something else behind their control such as a supplier going broke. By carrying out regular assessments of potential threats to your business, you'll at least minimise the risk of that happening. This guide covers:
Set about a thorough risk assessment of your business processes. Identify all threats and how they could impact on your business, how likely they are, when they may happen and how long the damage would last. Then work out the seriousness of each threat - what loss you would incur from them, measured either in terms of finance, damaged reputation, lowered staff morale, loss of credibility, or other possible negative outcomes.
Look at both external and internal factors. Threats from outside include new competitors, a downturn in the market, shifts in customer demand, rises in interest rates or the cost of raw materials. Internally, look at IT security, brand integrity, staffing, strength of your management team, spread of your customer base, suppliers. Consider fire, flood, theft and vandalism risks.
Once you've identified the threats, do what you can to dilute the risk. For instance, if there is too much dependency on one or two customers, an obvious step is widening the client base. Avoid market changes by not investing too far into the future or focusing on one product. Then look to protect yourself in case it happens anyway. Create a contingency plan for each risk and look at taking out insurance against the key threats.
SWOT (strengths, weaknesses, opportunities and threats) analysis will help you pull all of this together into a clear, actionable process. Look at the company from a top level, assessing big risks then hone in on specifics to ensure you're covering all threats from outside and inside. Carry out the process every six months and keep a live SWOT document you communicate to all senior management.
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