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Analysing business risks

Chris Elphick
Tuesday, March 06, 2018

TODAY my focus is on understanding and analysing risks.

Running a small business is a risky business. If we can't handle risks we should probably not be in business for ourselves.

Because risks are part of running a business we cannot ignore them — we must do our best to plan and prepare in order to reduce their impact.

In the Pacific we live with external risks all the time — cyclones, storms, earthquakes etc — and the challenge is to prepare as best we can without letting the fear of the risk stop us from running a successful business.

Internal risks are easier to manage — health and safety is an obvious one. All businesses should have a health and safety plan and make sure that you eliminate as many risks for yourselves, your staff and your customers as possible. Move things that people could trip over or slip on or be hit by. One injury to a customer could ruin your business. Move rubbish and check all your electrics so there is less risk of fire. One fire could ruin your business!

Another set of risks are associated with making wrong business decisions — these are almost always associated with poor or inadequate planning.

We recruit someone without proper process; we enter into a business relationship without doing due diligence on the other party; we start a new business without checking the market and customer base.

While we may not be able to control external business risks like economic downturn or loss of tourism revenue we can keep ourselves informed by reading the newspapers, internet or through the TV so that we are not taken by surprise.

The nature of many small businesses is to be reactive and that causes problems when it comes to understanding and analysing risk.

We have to be proactive — we have to keep asking ourselves what might stop this business achieving its goals. Get into the habit of doing this on a regular basis with your business partners or key staff. By taking this proactive approach you might be able to identify the opportunities associated with the risk. For example whenever there is a major weather event there are international visitors and organisations that need services and facilities.

Perhaps by working with a couple of other local businesses you can identify the opportunities that might emerge from a risk.

Developing your planning skills and engaging your team in regular planning will help mitigate many risks and will also develop your problem solving skills which will be of benefit to the business. Most risks can be reduced if we think about them and accept the challenge to act on them. Risk management is a legitimate business activity and should be part of your regular business development processes.

Engage your staff, ask your customers, walk round your business and see what could cause a problem. Identify things that have been annoying you for ages and fix them! The chances are that if they annoy you they annoy others!!

Discuss concerns about external business risks with your mentor or business adviser. Participate in your local Chamber of Commerce and discuss potential risks with others - they may have ideas you have not thought of. Perhaps by working together you can alleviate a risk collaboratively.

Risks are part of business. Start with a simple SWOT (strengths, weaknesses, opportunities, threats) analysis to make a list of the main threats that could impact on your business. Identify those that you can eliminate by better business processes and do so. Refine and improve your planning processes. Develop a resilience plan for business survival following a major disaster. Involve all your staff and encourage them to think about risks to their own families and communities.

Finally make sure that your customers know you are working hard to reduce risks in your business — the more they feel safe the more business they will bring you!

If you need help with understanding or analysing risk or you want some feedback on your own practices, then please get in touch.

* Chris Elphick is partner in Breadfruit Consulting, formerly Learnfast Pacific, supporting the development of a range of businesses and organisations in Melanesia and other parts of the Pacific. He is an experienced trainer, coach and business mentor and has years of experience of working with Small and medium enterprises. He and his partner Hazel Kirkham live in Vanuatu.

Breadfruit Consulting have partnered with Fiji Entrepreneur to develop mentoring services for new and young entrepreneurs.

If you have an issue or query related to this article, please contact Chris at or text to +6785500556

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