Steve Davies Online

Going through a risk analysis profile helps you to identify and codify the major areas of potential risk that threaten your major asset. The final and most important piece in implementing this process is developing a formal, written risk avoidance plan. 

Going through the questions in the risk analysis profile above is the first step. If it is difficult, break the profile down, take one category a month and allocate time to go through it. It is a very important process. While it may seem daunting, there are a number of resources that can help you turn thought into action. If you can’t do it yourself, find someone (accountant, consultant, coach, peer group) to help you.  

What you’ll find is that the risk in some areas is capable of being reduced and the risk in some others cannot. What is surprising is how many areas can be proactively addressed (even the ones you assumed could not) when you really start thinking about them and realize how dangerous these variables are to your business.  

To construct the risk avoidance plan, look at each area of your profile and determine strategies for those areas that you can prevent or mitigate. Use the analysis you developed in the Risk Analysis Profile to identify action steps in the following areas.  

• What is the downside exposure in revenues and profits under different scenarios? Identify what you need to do to upgrade your financial reporting and ensure that you have the information in place to undertake the proper analysis.  
• What can be done to change or lessen the impact? As part of your financial analysis look at every area of cost and identify what actions you will need to take and at what point if you see a drop in revenues.
• What fixed costs can be turned into variable costs? Look at what can be outsourced in ways that can reduce payroll costs. If you aren’t ready to take action yet, identify a trigger point at which you will. 
• What factors could derail the plans currently in place for your business?
• What do you expect to be different about your business in three to five years? 

The action steps to implement this vary in their complexity from company to company. The major shortcomings I find in small business are lack of focus and inadequate systems and looking at those is a great place to start. If you do nothing else, complete the questionnaire, answer the questions above and set a goal to make changes in at least two areas. You will be ahead of most of your competitors.