How do you conduct a risk assessment on an idea when writing a business plan? Or you need a sample business risk assessment template? I advice you read on. Every business involves some risks. This may be little or much depending on the type of business as well as many other market factors.
Identifying, outlining, and assessing the risks involved in a new business and developing strategies to manage those risks is an important, in fact indispensable step to take when planning a new business.
The Importance of Conducting Business Risk Assessment
By understanding potential risks to your business and outlining strategies to cushion their effects, you will help your business recover quickly if an unexpected incident occurs. For instance, a risk assessment will unveil workplace risks that you or your employees are exposed to. And it will help you meet your legal obligation for providing a safe workplace and reducing the likelihood of workplace mishaps that can impact negatively on your business.
Types of risk vary from business to business, but conducting a risk assessment and preparing a risk management plan involve a process that is common to all business. It goes without saying that the first step to take when conducting a risk assessment is to identify potential risks to your business. Understand the scope of potential risks will help you come up with realistic and cost-effective strategies for handling them.
When considering the types of risks that your business is prone to, it is very important that you think broadly. This is where many people go wrong in their risk assessment; they focus only on the obvious concerns like fire, theft, competition, etc. without paying attention to subtle but equally dangerous concerns.
Assessing your Business for Possible Risks
Only after assessing your business can you successfully identify the risks associated with it. Start by thinking about your critical business activities, which includes your main services, your resources, your employees and factors that could affect them or their work.
These factors include natural disasters, accidents, power failures, and illness. By assessing your business this way, you can work out those aspects that are indispensable to your business.
Conducting Business Risk Assessment – A Sample Template
After assessing your business to get a clear picture of it, you can start identifying the risks involved. Go through your business plan to see those things your business cannot do without, and list some possible risk factors that could cripple those indispensable things. Asking yourself the following questions will be of great help:
- How, why, when, and where are the risks likely to happen in my business?
- Are the risks coming from within or from external sources?
- Who might be affected if an incident occurs?
Don’t just think of what answers you have to these questions, write down your answers. Then start asking yourself as many “what if” questions as you can, using the various risks you have in your list? The following are examples of such questions:
- What if power supply ceases suddenly?
- What if key documents are destroyed?
- What if vital information gets lost due to hard disk crashes or virus attacks?
- What if an intruder gains access to confidential information?
- What if one of your best employees quit suddenly?
- What if your competitors reduced the prices of their products by half?
- What if your suppliers went out of business?
- What if the area you have your business in is affected by a natural disaster?
Also write down your answers to these questions. By now, your risk assessment is gradually taking a good shape. But you are not done yet. After identifying the potential risks to your business, brainstorm with other people, such as your financial adviser, accountant, staff, and other interested parties. This will help you get many more perspectives on risks to your business.
Aside the ones you have listed, think about the events that have affected other businesses already in market, especially your competitors. What factors led to those events? What were the outcomes of those events? Don’t you see them happening to your business, too? Answer these questions, and you will be able to identify even more risks that may be from external sources.
Don’t forget to identify each step involved in your work processes and outline the associated risks. Think of what factors could hamper each step and how this could affect the rest of the process. Once you have identified the risks associated with your business as explained above, you will need to analyze the likelihood and consequences of each, and come up with options for managing them.
After completing your rough draft, review it, and reproduce it in a better and more presentable format.