As an entrepreneur, you always find yourself in a crisis within your business in your day to day operations, and also with the demands within your business. The responsibilities you take upon as a business person and business owner, requires you to know the risks that your business is facing and how you can manage it through risk management.
During these trying times, you come across so many crisis within your business and maybe you haven’t planned for them or maybe you don’t know how to plan for them when they occur.
In your business, when a crisis occurs, you need a plan when situations suddenly occur. Sometimes you ask yourself, how can I make a plan for this crisis? Or how do I even plan for a crisis? What are the risks that my business is facing? Am I prepared for it? Adopting the following techniques and tips will help you to manage your crisis in your business.
Risk planning is the process of identifying, prioritising and managing risk. Every business has objectives, that is, goals that it seeks to accomplish. These are called Critical Success Factors (CSF).
Risk events threaten the successful competition of these critical success factors.
So before going to plan for anything you need to understand what risk planning really is and once you have understood it you will see the benefits of having a crisis management plan. And, what are the crisis management plan benefits you ask? And why have one? Lets look at the benefits and why you need to have a crisis management plan.
Benefits of having a crisis management plan.
- It helps maintain your business reputation especially in the eyes of customers, competitors and industry leaders.
- It improves safety, the health of ones well being
- It increases productivity during & after the crisis
Well aren’t these benefits amazing to have once you have a Crisis management plan?
2. The key basic risk areas the SME’s face
You find that many SME’s are struggling to know their risk areas that they are facing. Well listing down the risk areas your SME is facing can be an example such as:
- The Pandemic
- Health
- Cash flow
- Credit
And the list continues. But to know the key basic areas will help you to know where the risks can be grouped in
Let us take a look at the key basic risk areas:
1.Market Risk – Strategic
Market Risk is the potential loss of value in assets and liabilities due to changes in market variables. Examples: interest and exchange rates, equity and commodity prices.
2.Credit & Liquidity Risk – Financial
Liquidity risk refers to how easily a business can convert its asset into cash if it needs funds. Financial risks are everywhere and come in many different aspects that affect everyone.
Credit risk is the danger associated with borrowing money. If you borrow money and you are unable to repay the loan, it will default.
Investors who get affected by credit risk usually suffer from decreased income from loan repayments and also lost in interest.
3. Operational Risk – Operations
Operational risk is the prospect of loss resulting from inadequate or failed procedures, systems or policies.
Employee errors, system failures, fraud or other criminal activities are examples of any event that disrupts business processes.
4.Compliance Risk -Legal
Compliance risk is the exposure to legal penalties, financial forfeiture and material loss an Organization faces when it fails to act in accordance with industry laws and regulations.
On our next part we are going to talk about the steps to planning for a crisis. Feel free to leave a comment on what you think.