It’s impossible to run a business without taking risks. There are ways to reduce them, but first you need to understand what the risks are that your business may face. This checklist will help you to identify some key risks so you can take appropriate action.
Cash flow risk
Cash flow must be a priority in your business risk management process. You can only function if you have enough cash to cover expenses and invest in growth. All businesses need a sound financial plan. You also need to keep a tight rein on your spending, have an effective banking system in place and take steps to ensure your invoices are paid on time.
Managing business reputation is fundamental to your success. It’s important to monitor customer complaints and act quickly to resolve problems as they arise.
Business cyber risk
A cyber-attack could undermine both your finances and your reputation, putting your entire business at risk. The Government’s Small Business Cyber Security Guide, opens in new window provides simple and cost-effective ways for you to protect your from different cyber security incidents.
Fire, flood, cyber-attacks, pandemics – there are many events outside your control with the potential to bring your business to a standstill. Business continuity risk management includes taking precautions, such as ensuring critical information is regularly backed up, and putting a contingency plan in place. Insurance is also vital. It can help you get back on your feet should the worst happen, though it’s important to check both cover and exclusions.
Supply chain risks
Just-in-time inventory and relying on overseas organisations for essential inputs are cost-efficient when things are running smoothly but can leave you without a safety net if supply is interrupted. Diversifying your suppliers and keeping them onshore where possible will reduce the risk.
As a business owner you’re liable for things like injuries to your employees or customers and damage to other people’s property. Some insurances such as workers’ compensation and public liability insurance are compulsory, so it’s important to talk to a professional insurance broker about the most cost-effective solutions.
Foreign exchange risk
If you’re trading internationally, there’s a danger that conversion rates will suddenly change. A specialist banker can help you to mitigate various threats.
Product risk relates to the things that could go wrong with the product or service that you're offering. Appropriate market research and testing are required to make sure there is a demand for your product and that it meets necessary and or desired standards.
Your business is at risk if you depend on one or two major customers for most of your income. It’s important to maintain a good relationship with them by staying in regular contact and discussing their needs while you focus on broadening your client base.
It takes time and money to train employees so losing them poses a very real risk. Retention strategies don’t have to be complex or expensive and can be well worth the investment. It’s also important to ensure that more than one person knows how to carry out each task.
Protection for your business
Sound risk management can strengthen every aspect of your organisation and protect your business wealth. Check out our more detailed guide to managing major risks.
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The information contained in this article is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, NAB recommends that you consider whether it is appropriate for your circumstances. NAB recommends that you seek independent legal, financial and taxation advice before acting on any information in this article.