Risk and uncertainty are part of being in business and just like each of the other 8 strategies, we have to be strategic about it. Unfortunately, many businesses fail to do the work they need to in this area even though it’s a critically important piece of being a sustainable and successful business.
As Richard Branson says, risk management is about “protecting your downside”. It’s also about making sure you have an upside, but I’ll touch on that a bit later.
Do you know how to develop your risk management strategy?
Protect Your Downside
I’ve come across so many businesses, no matter their size, that are poorly structured.
For example, they haven’t protected their intellectual property. They’ve lumped it in with their operating entity, which is potentially at the most risk. If anything goes wrong, it goes wrong in the operations entity because that’s where the business is actually being done.
IP is an asset but in many businesses, it’s not formally separated out from the other aspects of the business and instead it’s in the mix with operations, which means if anything went wrong, the IP is compromised.
Asset structures and protection are also important parts to risk management.
You must also implement contingency planning – looking at a future that can’t be predicted with any certainty but could still take place and planning for it. This requires considering the negative “what-ifs” and having a solid plan if things go wrong (your business strategy is dealing with positive “what-ifs”). Ask yourself, “If this or that worst scenario were to happen, what would we do?”
If we’re talking about a global pandemic like COVID-19, no one could’ve predicted that, but most of us are forced to think about it now. This may not be the only time that ever happens in our lifetime.
I’m working with a client that wants to build a 100-year company; it’s currently in its 31st year of operation. Now that they’ve dealt with the pandemic, they have a plan for severe situations like it.
That being said, your contingency plan doesn’t necessarily have to be as dramatic as preparing for a pandemic. You can plan for something like one of your best-selling products becoming redundant and people not wanting it anymore. Part of risk management is watching trends.
Of course, there’s a massive research engine called the internet but there are also organizations that do nothing but map trends. Whichever tool you use, you need to get ahead of the curve and follow the trends for your industry and type of business.
Sure, many business owners have grown by the seat of their pants on sheer hard work, determination and a little bit of luck. Maybe they haven’t done strategic risk management work and still managed to build a successful business, but everyone eventually comes to a point where it’s worth doing because it protects their downside. It’s much better to be safe than sorry.
Get a customized plan on how your business can protect its downside.
How to Protect Your Upside
I always tell my clients: your business is a reflection of you – the good bad and ugly. The business will never outstrip you as the founder, owner, CEO, or leader.
One of the ways to manage risk is to demand growth within yourself – who you are as a leader, your skills, technical knowledge and growth in your “human beingness”, as I like to call it. Personal development and growth are absolutely critical for managing risk because the further ahead you are, the better equipped you are to see things you’ve missed before. Maybe you thought one department was doing really well but then you realize that there are gaps and they could be doing even better.
Without doing the work on yourself, you won’t recognize those gaps and opportunities because you’ll end up with blinders on what you, your people and your business are capable of doing.
Invest in personal development so you can see things from new perspectives. When you do that, new possibilities become available to you and your business, and your ability to lead your business to great success.
In the same vein, many businesses fail at managing the health and well-being of its people. The leadership team and employees are driving the charge and carrying out all business activities. If the people are unwell, mentally and physically, how can you expect your business to be healthy? This is a key piece of risk management because you want your core team to remain healthy to drive the business forward.
Of course, you as the Business Owner, Founder or Entrepreneur, are likely THE most important person in the business. Given how important you are, how are you managing your health, well-being, and fitness? Taking care of you IS a priority for the success of the business and in managing risk in the business.
If you want to get a deep dive into Risk Management strategy and the other 8 strategies, sign up for my FREE live webinar (this knowledge has helped hundreds of entrepreneurs EXPLODE their business growth)…