Risky Business

Jun 22, 2009

In a recent press conference, the Head of the CDC, announced that swine flu had now taken the lives of 14 Americans, and that the US Government would do "whatever it takes" to bring this pandemic under control.

In other minor news, over 500,000 smokers died last year, over 43,000 motorists lost their lives, just under 15,000 people died from a fall - including 1,200 falling off kitchen stools, 4,000 drownings occurred, and nearly 500 patients involved in elective surgery did not wake up. And, in news you may not even have heard, 36,000 die each year on average from regular flu. Clearly, our government has a problem with Risk Management.

For owners of emerging and mid size business, Risk Management is an important concept. It involves everything from avoiding and controlling known risks, to the judicious purchase of insurance to help cover expected costs.

There are two main types of risk in your business. There are operational risks, like fraud, losing employees, or what you'll do if one of your key employees becomes disabled. Then there are financial and insurance risks and strategic risks, such as how you as the business owner are going to achieve your goals if your long-term business plan doesn't work out.

There are also some specific risks in today's business climate for small companies, such as what you'll do if your bank is not able to roll over your business loan. In that situation, you can minimize the risk by diversifying your bank accounts, developing relationships with other bankers in your community, and making sure you have accurate and timely financial statements.

The key to developing an efective risk management plan is first to perform a risk analysis. In large companies an enterprise risk-management project is an ongoing evolution, and the plan will be revisited on an annual basis. Risk analysis is a straightforward process. It involves asking key managers and the CEO about issues the company might face and building a checklist of risks. These can then be prioritized.

Once we have identified the major risks, it is possible to develop a strategy for managing them. Some risks can be avoided or handed off to customers or suppliers, other risks have to be assumed through insurance or self-insurance. A good risk management plan will protect the company in good times and bad, and will help when making "bet the company" decisions such as acquisitions and mergers.

To talk about what's keeping you awake at night. contact David Kirkup, Partner with B2B CFO and a qualified Risk Manager (ARM), on 404 348 0326 or dkirkup@b2bcfo.com


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