The only sure thing about running a small business is that nothing is certain. At least, it seems that way. But it doesn’t have to be that way.
Adverse events that seem beyond a business owner’s control can be mitigated (or avoided altogether) by practicing risk assurance. But what is risk assurance, and how does it work? Well, it’s a big (and important) topic. So, we’ll devote an entire series to it throughout September.
In today’s post, we’ll provide an overview of the risk assurance process, so you can determine if it’s something your small business should consider.
What is Risk Assurance?
Well, it is what the name implies. It’s a process designed to provide assurance against risks that could negatively impact your small business. And it runs the gamut from finances to reputation management. Its strength is anticipating problems and creating plans to deal with or avoid them altogether.
So, how’s it work? Broadly speaking, risk assurance is accomplished in four stages. Let’s look at them now.
The first step, and arguably the most difficult, is to identify potential risks. Why the difficulty? Well, as the old saying goes, you don’t know what you don’t know.
And that can be the source of many problems. Small business owners must have a slew of sound systems and processes to navigate the tax and financial world. It’s easy to miss potential landmines because small business owners are often focused on simply keeping things afloat.
So, getting outside help in this process is crucial, especially with taxes and finances. A good CPA will have the time and expertise unavailable to many small business owners.
Business has plenty of risks, but not all are likely to occur. And if they do, the impact may be negligible.
So, once risks are thoroughly identified, then it is essential to assess them. There are too many variables for this blog post, but here is a primer to help you determine if a risk is just a bump in the road or the edge of a financial cliff.
Developing Risk Management Strategies
At this point, you’ve got some help to identify risks and determine which ones are the most likely and most dangerous.
Well, you need a plan. For example, let’s say that one of the greatest risks to your business is a lack of internal financial controls. You’ll need a strategy to devise those structures, develop training on them, and implement them. Don’t forget to consider any costs associated with the new plans, especially those associated with the next step.
Ongoing Risk Assurance
It would be great if risk assurance were a set-it-and-forget-it affair. But that is rarely the case.
You’ll have to monitor risk assurance strategies and their implementation. Without monitoring, policies get forgotten or neglected as new hires are made and your business develops.
Also, new risks might emerge, or previously known risks might take on greater importance. You’ll have to adapt accordingly. And that is easier with a regular policy of review and revision.
Why you need risk assurance
No doubt, risk assurance requires some work and commitment. And it usually comes with extra expenses. So, why bother?
In short, the advantages of avoiding problems far outweigh reacting to them without a plan. What advantages, you ask?
Well, here you go.
Risk assurance can protect you on everything from taxes to cash flow. Having a risk assurance plan in place gives you and your employees peace of mind that your company can avoid financial problems and weather any storms that might occur.
It can be tough for small businesses to gain a foothold with customers, suppliers, and investors. A risk assurance plan can act as a selling point. Just like it gives you peace of mind, it can soothe potential stakeholder worries and differentiate you from the competition.
Risk assurance gives you a plan to remain operational in the face of natural disasters, economic downturns, cyber-attacks, and even fraud.
When things like this happen, those without a risk assurance plan scramble to pick up the pieces. Those businesses with a plan have all the pieces and know how to put them back in place efficiently.
The Bottom Line
There are no guarantees in business, but you can be more prepared with reasonable risk assurance. Next week, we’ll look at how to compile the information needed to make a good risk assurance plan.
See you then.