What are the best things about working alongside your brother? A “strong team dynamic” and “complementary skill sets,” according to Top10 Dynamic Entrepreneurs Myles and Piers Redward. The brothers work together as the co-founders and joint CEOs of Payright, which is the latest payment plan provider in the market that targets products and services with higher price Read More…
Why developing risk awareness within your small to medium business is an absolute must
Wed 2 November 2016 - 11:24 amFeatured | Management | Small Business | Strategy
Businesses must navigate a multitude of risks daily. While large companies tend to have dedicated “risk management” departments, which monitor threats to profitability, among SMBs, risk management often begins and ends with physical risks, including those posed by work health and safety hazards.
But what of the risk of competition, market conditions, cyber security breaches and emerging industry disrupters? SMBs can’t afford to take these risks for granted, which is why they must adopt some form of risk management policy or work to develop risk awareness within their business.
Risks can be broken down into five main categories; strategic, financial, operational, compliance and reputation.
In some ways all risk comes back to finances be that loss of revenue or increased costs but financial risk refers specifically to cash flow. This is the area most companies focus on hardest in their risk but the ones who stop here are ironically the ones most likely to suffer from it.
The key areas to develop more awareness in is strategic, operational and reputation. Keeping on top of compliance risk is as simple as making sure it doesn’t evolve into a strategic risk.
Poor strategy — failing to anticipate market shifts or adapt to change — is one of the most common reasons for business failure. No company is too big to be insulated from strategic risk. Ask Blockbuster, Nokia, Borders, BlackBerry, SunMicrosystems or Kodak to name a few businesses who have suffered from strategic “epic fail”.
Operational risk is about identifying potential risks within your business and proactively warding them off before they develop.
There are straightforward risks like server or telecoms failure and employee absences but are you focused on self-made risks like inhibitive processes that threaten your reputation and profits?
Reputation is everything and loss of reputation can be hard to bounce back from. It’s not just about how your customers see you but how your employees and potential employees see you. These are the people who will identify risks on your behalf, who will recognise or even create the very technologies that could be a threat to the survival of your business.
These risks can be managed simply by implementing internal processes to keep you apprised of trends and changes in your industry and ideas from your future competitors.
From a consumer angle, data-mining intelligence gathered in a database from surveys and others feedback mechanisms can be utilised to predict changes in the market or identify patterns. The more you know, the less difficult a transition seems.
Internally, it should start with creating and recruiting for the right culture at every level. Fostering a culture where staff are comfortable with change and adaptation is par for the course will keep you ahead of your competitors when seismic shifts occur as they are always wont to do.
With the right sponsorship, internal project teams are ideal sources of market knowledge and fresh ideas. Encourage initiative and creativity internally and externally. Look at supporting or collaborating with start-ups, whether that is a mentoring or financial relationship. It’s possible you’ll be helping create your next acquisition.
Encouraging your future competition can actually be quite healthy. In the 70s, a Kodak engineer developed a digital camera but rather than encourage this invention and drive it to market, they buried it. Sometimes it’s better to slowly cannibalise yourself than to sit back and wait for others to pick at your carcass — Kodak sure realise that now.
Collaboration should not be the exclusive domain of external partners; internal collaboration should be the new foundation of your business. Interdepartmental rivalry or distinction is a thing of the past. There is much that can be learnt about improving process — and in turn, profits — simply by tearing down walls between divisions and bringing employees closer together. For example, marketing can help IT better understand technology developments, and foster discussion around what is possible from an IT perspective and help fuel creativity.
Now, more than ever, businesses need to be aware of risks to their business. Developing processes to understand what your competitors are doing, what your customers are thinking and what innovations are being developed in your industry has never been more crucial to survival.
About the author
Peter Khalil is the Founder of Perris Knightsbridge Chartered Accounts. He previously wrote Overcoming the barriers to tech start-up ecosystems flourishing across Australia for Dynamic Business.
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