There are many sources of business risk. When starting your business it's important you understand there are certain risk events you can control and other events you can't.

Changes in government legalisation or adverse weather conditions (drought, flood, tornado etc) are examples of risk events outside your control.

Operating a business free of risks is limited to managing risk events you can control.

Minimizing business risk

Identifying and managing risk is an integral component of building a successful small business.

It would be impossible to remove risk from all situations but you can take steps to remove or reduce your business risk.

The process for minimizing business risk is graphically illustrated below.

  1. Identify Risk
  2. Avoid
  3. Minimise
  4. Transfer
  5. Manage or retain

To minimize business risk, small business owners need to implement effective risk management strategies into their business.  This is a simple process of identifying what is a possible risk event, grading the event and then designing a strategy to minimize, manage or remove the risk, the latter being the most preferred.

Here's an example of how risk management strategies work for small businesses.

Where to start: completing a risk management checklist

To minimize your business risk, start by completing a risk management checklist.

Purchasing business insurance is one way of reducing business risk.  When purchasing insurance make sure that you have sufficient cover in place to meet your current and future requirements.

Types of business insurance required by small business owners:

General

Risk and Life

Business Disruption

Buy/Sell

House, Vehicle and Personal Goods

Income Protection

Key Person

Property

Life

Public Liability

Total and Permanent Disability

Workcover

Trauma

Outsource your risk management strategy

Your financial advisor is best positioned to provide you with risk management advice.

Every small business is different.  That's why discussing your requirements with a specialist will help you develop a tailored risk management strategy for your business ensuring you are well on the way to building a business that actively and successfully manages its business risks and gives itself the best chance of succeeding in its core business strategy.

 

Disclaimer: this information is of a general nature and should not be viewed as representing financial advice. Users of this information are encouraged to seek further advice if they are unclear as to the meaning of anything contained in this article. Kidmans Partners and Bstar accept no responsibility for any loss suffered as a result of any party using or relying on this article.

 

 

Kidmans Partners Bstar Pty Ltd