 What is Risk Management for Small
Business?
“Risk management is a professional process that allows companies to conduct
aggressive operations with low distraction and financial distress caused by risk-related
trouble.”
-Brad Forsythe, Bulletproof Your Business
Are you surprised at the aggressive posture
stated in this definition? My definition of risk management is
all about making money and playing offense. Small businesses
can’t afford the luxury of sitting quietly in place and
playing defense. Rather, you should use risk management to boost
your return on assets by as much as 100 percent. A 20-year USC
research study shows those companies that proactively manage crises
recently enjoyed a 100% higher return on assets. Click here
to learn more about the study. Click
here to learn more about the study.
Risk is part of everything that touches your business. Risk comes along
with every new opportunity, every innovation, every new customer, supplier,
employee and financial stakeholder and every new sales order. Some risk
is relatively harmless but other risks can wound and, perhaps, even destroy
your business. We can’t help but focus on risk because it will
hurt us badly if we don’t.
But we will fail if we focus our resources on risk. Instead, we must
do everything within our power to keep our primary resources focused
on innovation and improving customer relationships. This critical focus
is the only way to make money in a small business. We must find an effective
way to manage risk or it will distract our focus. Learn
how risk works in our companies.
Many companies are confused by the seemingly immense complexity of risk
and the wide array of subject matter expertise needed to deal with it. “Analysis
Paralysis” sets in and they mistakenly shrink from managing risk.
They fail to realize that America’s small businesses have become
world-class masters at managing complex issues. We handle complex issues
every day.
We do it by wrapping professional business process around complexity,
process that is simple, measurable, trainable, profitable and works over
the long term. We do this by finding tested, common sense business process
models and tailoring them to the unique needs of our companies. This
safe, familiar process is exactly how I urge you to start managing risk.
I call it PreAct™.
PreAct™ - “A company-wide, long-term, trainable process that
preempts preventable risk, reduces remaining risk, increases employee
productivity and the value of risk service suppliers.”
Here are the highlights of PreAct™:
-
It is a “whole” solution – not
disjointed bits and pieces of solutions. This single solution
covers your entire company.
-
It is scaled to fit a small business – it
is not scaled up for the Fortune 1000. PreAct™ is designed
for “do-it-yourself” implementation.
-
It is simple, low cost, provides a high
return and remains effective for years to come.
-
It lowers your cost of insurance and legal
services – and increases the value you receive from
attorneys and insurance agents.
-
It naturally focuses nearly all of your
company’s resources on innovating your products and
services and improving customer relationships.
-
It stops those risks than can be prevented
and reduces the danger from remaining risks – since,
of course, all risks can’t be prevented. PreAct™ lets
you reduce the danger of a potentially mortal wound down
to something that might be a flesh wound – or maybe
even just a scratch.
-
It makes your employees more productive
whenever their work touches an area of risk – which
is something that happens every day to every work team in
your company. What do most employees do when they encounter
risk? They either stop or slow down. PreAct™ keeps
them moving fast and with confidence.
PreAct™ makes business
easier for the CEO
PreAct™ starts by helping the CEO understand
his/her objectives for managing risk, and then PreAct™ gets
the CEO out of the risk management business. This is accomplished
when the CEO appoints a risk manager.
PreAct™ helps the CEO to identify the right person to become the
company risk manager.
This person is probably someone already high up within the company – someone
who is already wearing another hat. It might be a CFO, an administrative
VP, a Human Resources director, a director of accounting or operations – someone
that the CEO knows and trusts.
That person will wear two hats – their current hat, whatever that
may be and that of the risk manager. This works. I know. I’ve lived
it. Small business need risk management, but, with a good process, few
small businesses need a full time risk manager.
The risk manager takes the risk management process model - PreAct™ - and
shapes it to fit the unique needs of his or her company. This “fitting” effort
isn’t difficult or costly.
Then, following the models within PreAct™, the manager implements
the risk management process and manages it over the long term.
Simplicity is the key that allows us to effectively manage complex issues.
PreAct™ is remarkably simple, especially when considering the immense
complexity of the hundreds of threats that confront every company.
To learn more about PreAct™ click
here and review Bulletproof Your Business.
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