Article Sections:
 
1.  Why Should We Care about Small Business? 
 
2.  What is Risk Management for Small Business?
 
3.  PreAct™ - the enabler.
 
4.  Implementing PreAct™ in the Small Business Environment.
 
5.  “Nothing Focuses the Mind Like the Sight of the Gallows.”
 
Section 1.  Why Should We Care About Small Businesses?
 
You quickly get a headache when thinking about risk management in the small business environment. Risk management is especially challenging in this environment because few small companies have adequate resources to apply against the practice. Often focused on merely surviving the coming month or the next accounts payable check run, small businesses resist spending precious resources against efforts that might head off trouble that might never occur. No time, no budgets, no professional risk managers or training, no effective small business risk management models to follow and hence, no effective risk strategy.
 
Insurance and legal expertise is perceived as expensive, so it is purchased as sparingly as possible and applied against immediate needs instead of preventative applications. Small businesses are fragile, especially when viewed from a financial perspective. Few have adequate cash reserves to let them survive the body blow of a major trouble event. When you mix all these issues together, it is little wonder that approximately 550,000 small American employer businesses will disappear in this calendar year alone. That amounts to roughly 10 percent of all such U.S companies; resulting in an enormous loss of private wealth and personal entrepreneurial dreams.
 
What is particularly tragic about this loss is that much of it is preventable if more small businesses would practice risk management.  However, my conversations with small business CEOs suggest that few are even aware of the formal practice of risk management within small businesses, let alone possess a clear understanding of how risk adversely affects them or how risk management provides a significant competitive advantage for those who practice it.
    
It is terribly important that America improves this wasteful scenario. The contributions of small business are absolutely vital to the nation’s economic wellness, especially in times of a down economy. While small businesses generated 60 – 80 percent of net new U.S. jobs over the past decade, they generated all of the net new jobs created in 2000 – 2001; adding inestimable bottom-line and moral-building value to our nation’s then-struggling economy. And this is only the first item on an extensive list of economic benefits derived from small businesses. According to the Small Business Association’s most recent research, small businesses:

[Sources: U.S. Bureau of the Census; Administrative Office of the U.S. Courts; Endogenous Growth and Entrepreneurial Activities.]

Section 2.  What is Risk Management for Small Businesses?
           
Small businesses need a risk management process that is directly applicable to their unique needs and severe resource limitations. That process has four key characteristics, which are:

If you are the owner of a small business and all your personal wealth (often including your family’s home) is at risk every business day, you might desperately need such a process.