As an entrepreneur, no matter what type or size of business you run, you need to know how to manage risks on a daily basis. Risk management is one of the most important things you do. If you learn how to apply a systematic risk management process, and put into action, then your business tasks will run more smoothly and be a positive experience for everyone involved.
What is risk? Commonly, a risk is defined as an uncertain event that can have a negative impact on your goals. However, it can also create positive effects. It is natural to fall into the trap of thinking that risks have inherently negative effects. If you are also open to those risks that create positive opportunities, you can make your project smarter, streamlined and more profitable.
The risk management process starts with assessing the risk and analysing it. A risk assessment evaluates your business’ exposure to uncertain events that could impact its day-to-day operations and estimates the damage those events could have on your business’ revenue and reputation.
Once you have identified the risks, you need to determine the likelihood and consequence of each risk. You develop an understanding of the nature of the risk and its potential to affect project goals and objectives.
When it comes to risks, you need to know how to evaluate or rank the risks. You can do that by determining the risk magnitude, which is the combination of likelihood and consequence. You make decisions about whether the risk is acceptable or whether it is serious enough to warrant treatment.
Those risks that you ranked the highest should be your priority. You need to set out your plan to treat or modify these risks and set out a plan to treat or modify them to achieve acceptable risk levels.
For more on risk management, read this: https://www.smallbusiness.wa.gov.au/business-advice/insurance-and-risk-management/risk-management