July 8, 2016
There are risks associated with running any kind of business. Unfortunately, many business owners in Australia get caught out when a risk becomes reality and they do not have adequate protection. In some cases, this can even lead to bankruptcy.
Today, we’re talking about the importance of risk management, and how to establish an effective risk management procedure in your business.
Risk management is the process of identifying prospective risks in a business, and then developing a strategy or plan for managing these risks, if they were to eventuate.
Knowing what could go wrong in your business, and what action to take if it does, protects your business significantly from loss of profits, damage to reputation and other negative repercussions.
It also allows you to identify what kind of insurances you should be taking out in order to achieve maximum value for your insurance spend. By way of example, a construction company may require different types of insurances to an office-based corporate company.
On top of this, some forms of construction may require more specific kinds of insurances. As such, it’s not just about seeking protection, but seeking the right kind of protection. So that if something does go wrong, you are effectively covered.
Unfortunately, many businesses in Australia do not have an effective risk management plan, nor do they have the right kind of cover. In some cases, these businesses are forced to declare bankruptcy if a risk is realised.
There are many resources online you can draw on to develop a Risk Management Strategy. However, we always recommend speaking with a qualified professional, to assist with coming up with a viable plan that aligns with your business.
Ideally, your risk management plan should follow the steps below:
|Risk||Likelihood||Consequence||Level of concern|
|Storm damage||Likely||Business shut down. Financial losses over $20,000 per week.||4|
Head here for a more detailed guide on developing a risk management strategy for your business.
Once you have developed a risk management strategy, it’s important to revise it regularly. Risks change rapidly in today’s highly digitised world, so we recommend incorporating risk management brainstorming sessions into your regular working schedule.
Our insurance brokers can assist you with developing a risk management plan, and we can identify specific insurances that will protect you against potential risks. Contact us to get started.
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