Running a business is relatively easy at a time when operations are going as planned and you're steadily making a profit. If the company is successful and there are no major crises you need to address, your job should be smooth sailing from day to day.
Have you thought about what sorts of adversity might come along and jeopardise the long-term health of your business?
Even if things seem good now, though, you may have major risks lurking on the horizon. Have you thought about what sorts of adversity might come along and jeopardise the long-term health of your business? These might be either internal issues or outside forces that are beyond your control. Either way, if a threat to your company's stability exists, it's something you need to be mindful of and prepare to address.
Identifying the risks that threaten your business
You never know when your business might encounter serious adversity – events that might impede your ability to pay your employees, handle such matters as tax services or just conduct business from day to day. According to Business Queensland, there are a number of different risks your business might be facing at any given time, and you should prepare for any that could be applicable:
- Natural disasters: If your facility is hit by a flood, fire or other major physical incident, it will obviously interrupt operations significantly.
- Legal disputes: When companies are embroiled in conflict over a contractual breach, employment issue, insurance policy discrepancy or anything of that nature, it's likely to distract employees from the business at hand.
- Technology breakdowns: When a piece of hardware fails, a network breaks down or worse yet, a massive data breach incident strikes your business, it's very likely to impede people's everyday work.
- Financial calamity: A global market crash, an interest rate increase or even a simple problem with cash flow between your business and a customer might make it difficult to come up with the working capital you need.
As you go about managing your business, it's important to weigh all of these possibilities. Which ones are you most concerned about impacting your everyday affairs?
Making risk management an everyday priority
Once you're aware that the above risks exist, what can you do about them? Talk to any number of accounting firms or relevant government agencies, and they'll tell you: The best approach is to be proactive. No one should be dealing with risk simply by waiting for something bad to happen, then responding after the fact.
The Department of Industry, Innovation and Science recommends that companies make it a priority to manage risks on a daily basis. This begins with getting employees involved. If there's a certain type of adverse event that your leadership is worried about, it's usually best to discuss it with your employees, teaching them the importance of avoiding disaster scenarios and training them to respond if and when something bad happens.
Not only should your disaster plan be comprehensive, but it should also be something you revisit on a regular basis. The last thing you want is for your cybersecurity plan to be obsolete, or for your employee continuity roadmap to be insufficient for the current size of your staff. When the circumstances around your business change, your response to risk must be updated accordingly.
Establishing both internal and external control
As you seek to get a handle on risks for your business, you'll need an understanding of both internal factors and external ones. You never know whether adversity might come your way from inside the business or out.
Internal control of your organisation is largely about accountability. It needs to be clearly documented who's in charge of each aspect.
Research from CPA Australia indicates that exerting internal control of your organisation is largely about accountability. With every risk response plan you have, it needs to be clearly documented who's in charge of each aspect. They should know what to do when a risky situation arises, along with where, when and why.
Managing external risks is trickier because you have less control over things that happen outside your business. Nevertheless, it's good to network with others around your industry and within your geographical area – this will give you a good sense of how your risk profile looks and in what ways it might be evolving. It also helps to have reliable access to accounting and financial services so you can get through any adversity without breaking the bank.
Get an audit from Ashfords to find out where you stand
If anyone at your company is unsure of where your business stands with regard to risk, the best response is to turn to the experts in business bookkeeping and get a thorough audit of your financial statements.
When you work with us at Ashfords, we'll form an opinion of your business based on all the relevant statements and help you identify inefficiencies and potential improvements in your business model. No company can be totally free from risk, but with us on your side, you can be smarter and better prepared than ever.