On December 2nd 2014, my third ebook: Planning and budgeting - Advice for business owners and finance managers will be published for ipad, iphone and kindle and will be available from amazon.com. This blog entry is a sample from the ebook. There are 20 topics like this one covered in the ebook.
Risk can be viewed from the point of view of low to high impact and low to high likelihood. The impact and likelihood of most, but not all, risks tends to differ from business to business.
For example, a fire in most business office premises might be high impact but low likelihood whereas in a factory this risk may be high impact and high likelihood. Alternatively in some businesses the risk of employing illegal casual labour may be highly likely and have a relatively high impact but may be low likelihood low impact in other businesses.
Analyse the risk you identify in your business by impact and likelihood, high, medium and low. Focus on high impact high likelihood risks first, then any risk where either impact or likelihood is high etc.
The impact of a risk can sometimes, but not always, be measured and a monetary value allocated.
Do not ignore risks where the impact is difficult to measure as the impact may nevertheless be very significant. For example, the damage caused by a former key employee who removes customer information when leaving the business could be difficult to measure but have very serious consequences.
Unlike impact, the likelihood of any given risk occurring depends on a number of factors which can change over time. Likelihood of a given risk can depend on how good the relevant controls are in the business.
Well trained staff, operating to relevant and effective procedures will reduce the likelihood of many business risks for example, the likelihood of undetected falsification of expenses or fraud.
Change usually increases the likelihood of risk. This could be change in personnel or process or a new product being introduced.
Think of the business as a whole when considering risk. Talk to key management responsible for areas such as operations, production, distribution, sales and HR. The risks your business faces can be analysed by headings such as operational, regulatory or legal, financial assets and liabilities, IT, markets, people and strategic.
Once you have categorised the risks in your business you will be better prepared to consider how each risk may best be dealt with, whether via insurance, avoidance, improved procedures or training.
As a first step, why not pick the phone up and call John or email him and arrange to meet up.
John's website is: http://www.nomizon.co.uk
His credentials: http://www.linkedin.com/in/johntoppin