5 Steps to Help You Create a Risk Management Plan for Your Business

5 Steps to Help You Create a Risk Management Plan for Your Business

Are you losing sleep at night thinking about all the things that could go wrong in your business? It’s natural to worry about potential problems – but it’s not productive. By creating a risk management plan for your business, you can channel your worry into concrete solutions that will help protect your business from any real threats, so that you can focus your energy on building the business of your dreams. If you’re not sure where to start, check out these five steps to creating a risk management plan.


Step #1: Identify risks

For a few hours, think about your biggest business fears and make a list of all the possible risks associated with those fears. For example, some fears that may come up include:

  • What if your online store went down for a few hours – or days?
  • What if one of your key vendors went out of business?
  • What errors could your employees make that would hurt your operations?
  • What if you lost your biggest client?
  • What changing trends could impact your business?
  • What if you were the target of a phishing scam?
  • What if a fire were to damage your premises?

This isn’t a fun exercise to go through, but it’s a necessary step in order to create a risk management plan. By taking the time to brainstorm potential threats to your business, you’re identifying the vulnerabilities of your business and giving yourself the opportunity to come up with solutions to prevent these issues down the road.

Step #2: Determine the likelihood of each risk

Looking at your list, it’s probably immediately clear to you that some risks are greater than others. For example, depending on where you live, it’s way more likely that your small business could be targeted by a cyber attack than by a tornado. One way to determine the likelihood of each risk is to do some research to find out how often businesses in your industry are subjected to each threat on your list. It could be many times a year to a few times a year to never. It’s also a good idea to rate each threat as high, medium or low, based on this information.

Step #3: Determine the impact of each risk

Receiving one negative review on social media is something that will probably happen to every business in your industry each year – so the likelihood is high – but you can probably assume that unless the review is from someone with a large profile or goes viral, the impact will be low. On the other hand, losing your biggest client might not seem likely based on your assessment of the relationship, but a review of your financials could show that losing that client would probably mean the end of your business. Looking at the likelihood and impact of each risk, you’ll start to have an idea of where you should focus your risk planning.

Step #4: Create a prevention strategy

It’s time to transform your worry into action by creating a prevention strategy, starting with the threats that are both high impact and highly likely. For some of the threats, you’ll be able to easily come up with solutions on your own. For example, if you’re worried about online security, you can invest in a consultation with an expert who can make sure you have the proper infrastructure to protect you from cyber attacks. If you’re not sure where to start, you can look to other businesses within your industry to learn best practices from their experiences.

Step #5: Plan for the worst

What would you do if you weren’t able to prevent the disaster that you were worried about? Having a back-up plan in place – and on paper – will reassure you that you can face anything. For example, if your online store were to be compromised, you can have a process in place that allows you to take orders over the phone to ensure you don’t lose all your business while you’re getting your shop back online.

At this point, you should have a plan that lists the risks to your business, rates the likelihood and impact of each scenario, outlines how you will prevent each risk, and includes a plan of action if the threat were to hit your business. The final step in your risk prevention plan is to make sure that you have the right safety net in place to protect your business.

Step #6: Insure your business

Having the right for your business is a key component of your risk management plan, but is unfortunately something that many small business owners overlook. You might think that your business is too small to need insurance, but the reality is that all businesses are vulnerable to lawsuits or natural disaster, and small businesses are more likely to be closed based on just one claim. Take the time to shop around for the right plan for your enterprise, since different insurance providers will offer different quotes and coverage options for the same business.

Creating a risk management plan will take some work – and thinking about everything that could go wrong has the potential to provoke some stress. The upside though is that once you’re prepared for the worst, you might feel less anxious. You’ll have a solid plan in place that will help you protect your business. With that out of the way, you can focus your energy on something more fun – like brainstorming new products or your next marketing campaign!

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