Explore HPAudit
COMPANY INFORMATION
Touch Base

© 2015-2016 Hancke Potgieter Auditors

RISK MANAGEMENT FOR YOUR SME

RISK MANAGEMENT FOR YOUR SME

“All courses of action are risky, so prudence is not in avoiding danger (it’s impossible), but in calculating risk and acting decisively” (Niccolo Machiavelli)

We are all aware that business, as with life, is full of risks and things go wrong from time to time.

Some of us shy away from planning for these risks, put off by complex methodologies such as the Risk Matrix, and say “this is not for me”.

But it can be quite simple

Why not just write down what can go wrong – you can do it alone or with your team. As you are experienced in business, you have plenty of knowledge of the hazards out there.

Once you have a list, then ask yourself, what is the likelihood of the event happening? If it is very low and the outcome of the event occurring will have a small effect on your business, move on to the next risk.

Some risks will have a substantial impact on your business and it may be difficult to come up with a strategy to counter this risk. Speak to experts in the field, then approach the risk from different angles until a solution appears.

Eventually, you will have a series of strategies that could save your business one day. Most of the risks and the solutions you identify will be things you will probably have already thought through. But there will always be one or two you haven’t thought of and that is the power and benefit of this exercise.

It’s not negative thinking

For those who don’t like to dwell on what they call the negative, this exercise is actually a positive experience. Assessing what can go wrong and having a strategy to counter the risk will allow you to have the comfort of knowing you will be ready to react to adverse events when they occur.

Also, confronting your fears is never easy but by considering all possible angles and finding a solution you are in fact overcoming these fears. As they say, don’t meet your fears head on but tilt at them until you feel comfortable.

The unpredictable is happening more and more – who would have predicted Donald Trump becoming President?  So engage in lateral thinking when you do this process.

You also need to factor in how other people will react – very few economists, for example, factored in the complete panic that set in during the 2008 financial meltdown. Thus, many had the strategy of selling down their holdings should financial cracks begin to appear, but in the avalanche of sell orders, they couldn’t offload their holdings and took substantial losses.

Just remember that all high-risk-takers survive because they consider all the risks and make plans to counter them.

Have a look also at these excellent TED Talks videos “Three Simple, Fun and Effective Tools to Help Manage Risk | Will Gadd | TEDxYYC” and “Risk Management: Chris Davenport at TEDxMileHigh”.

No Comments

Post A Comment