Archive for the ‘Business Plans/Strategies’ Category
Risk Assessment
May 25th, 2009 | 
Author: A common theme for my business seems to be that I know what to do, but I just don’t have the time to do it the right way. Some business gurus would argue that you can’t afford not to do things the right way from the start and I’m sure that’s right. But when you’ve got a job and a business, your lack of time leaves you wanting to focus on the fun part of the business, the part you’re passionate about, or perhaps the part that actually makes money.
This week a key supplier of mine suddenly disappeared from the internet and I didn’t have a backup plan. The possibility hadn’t even crossed my mind. I’ve spent a week getting past the denial that they’re gone and then exploring ways to fill the gap they leave in my business.
When I first decided to go forward with the business, I did a Risk Assessment, which is a Six Sigma tool to identify things that could go wrong. My mistake was doing it, shelving it, and never updating it. It should be a living document that you update as your business changes and grows.
A Risk Assessment can be very complicated or very simple. Mine falls into the latter category and is a list of things that could go wrong with a column for how likely the event is to happen and a column for how I will react if it happens, or my mitigation plan. For example:
| Event | Likelihood | Mitigation Plan |
| Warehouse will catch fire | Low | Obtain Insurance |
| New competitor will have lower prices | High | Develop loyal customers based on excellent service, routinely review pricing strategy |
| Key supplier will disappear | Low | Find a backup supplier |
In some cases your risk assessment may result in implementation of tactics that almost ensure that the event never happens or it may simply make you more aware of the risks and able to respond more quickly. Obviously, events with a high likelihood of occurring need more of your attention and a robust mitigation plan.
In addition, you might want a column for the impact of the event. If the likelihood is high but the impact is low, it doesn’t warrant a lot of attention. Conversely, if the likelihood is high and the impact is high, you may need to change your strategy, make different investments in your business, or hire a key employee.
Just don’t forget to update it.
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