How to Identify Ways to Reduce the Risks Facing Your Business

I don't normally write on pure business topics. My specialty is project management. Of work as a project management consultant, I am often in a position to observe strategic efforts. And as a tiny business person, I am constantly facing the same issues as any other tiny business person.

 of those issues is risk.

As a project manager, risk is a condition that is dear to my heart. In fact, some writers have said that project management is all about reducing risk. While I definitely would not go that far, I would agree that risk management is a key focus for any project manager. And it is of those items that distinguishes project management from operational management.

As a project manager, they are constantly asking ourselves how to identify ways to reduce the risks facing our projects. As an entrepreneur, of the things I have realized is that building a business is a massive project. So in this article, I'll show you the same techniques I use to identify ways to reduce the risks facing your business.

Part of the issue with trying to identify the risks facing your business is basically the sheer overwhelming size of the endeavor. There's so lots of risks and so lots of opportunities that doesn't know where to start.

Part of that issue has to do with our poor use of English. What they call risk is not. Risk is actually a reference to the probability of occurrence. If something is positive then it absolutely will happen or it absolutely won't happen. Risk refers to that in between area -- neither positive to happen nor positive to be avoided. But if that is true, then they require other ideas. is the event that is in danger. What is it that might happen? They call this the risk event. The other idea is the effect of occurrence. If the risk event occurs what will be the effect? If I was one time teaching risk management, I'd be positive to point out that the effect doesn't must be negative. It could basically be positive. But since we are speaking about reducing risks from a business standpoint, I'll focus on negative risk effects.

So what does all this must do with identifying ways to reduce the risks facing your business?

By thinking about risk management in this way, they can identify a six-step method for identifying ways to reduce the risks facing your business. Each of the elements becomes a step in an overall method to manage your exposure.

The first step is to identify the risk events. What is it that could cause a failure or could set your business back? What might happen to your business? Now, you may be tempted to think in terms of insurable risk events. Fire, for example. Or theft. However, lots of other events could occur. What if of your competitors came out with a major advance? Or of your suppliers went out of business? What if of your key employees quit? What if there was a weather change? How would your business be affected?

Step is to put the risk events in order & to identify which of them you require to worry about. After all, you don't require to spend time solving a minor issue that is not likely to happen.

The next step is to analyze the risk events. You require to identify things about each of the risk events. First, you require to identify what the effect will be? How much will it cost to repair? How much will it cost in lost business? You also require to identify what the risk or probability is. How likely is it that this event will actually occur? Often you will only require to qualitatively choose the risk initially. Is this likely, or is it highly unlikely? Or something in between?

For each of the risk events, think of ways to reduce the probability of occurrence. How are you able to make it unlikely for this event to happen? Technically, they call this reducing the risk. All we are doing is trying to make an event less likely.

Now it is time to identify the ways to reduce the risks facing your business.

The next step is to do the same thing with costs. For each of the events, how are you able to reduce the costs of occurrence? How are you able to reduce the cost of recovery? What are you able to do to reduce the effect the risk will have?

The sixth & final step is to select the best techniques from the mitigation or avoidance techniques you have already identified.

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