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Monday, 21 April 2014

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Risk assessments will allow businesses to see the wood from the trees

In one way or another everyone has felt the impact of the harsher economic climate over the last few years. This has emphasised the importance of the need for all businesses, whatever their size, to undertake a regular risk assessment.

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Room for growth: Regular risk assessments will help businesses owners see the wood from the trees

 

Many people in business, particularly those who run owner-managed enterprises, will immediately respond to this by saying: “That’s not necessary, I know my business and if there was a risk that something may go wrong I would be aware of it immediately.”

That may be the case, but sometimes owners can become so close to their businesses that they reach the point where they can’t see the wood for the trees. It is always worth while to take time to stand back and take a fresh look at the business – you may be surprised at what you learn.

A business risk assessment is essentially a health check on the business. Large firms often arrange for professional third parties to undertake a review of their organisation for this purpose. While this would not be economic for most small businesses, there is no reason why the owner cannot undertake the exercise themselves. The points below, while not exhaustive, are some of the areas you may wish to consider to see if any potential risks exist for your business:

  • The external business environment. Is the sector in which you operate growing or shrinking? What innovations or improvements are your competitors offering?
  • Changes in legislation. For example, many guest houses and hotels have had to incur expense ensuring their properties meet the enhanced fire regulation requirements that have been introduced in recent years.
  • Future movements in interest rates. At the moment the Bank of England base rate is at an unprecedented low level. As and when rates rise again, will the business be able to support the increased financial burden?
  • How does your pricing tariff stand against your competitors? Are you charging too much or even too little for the product you offer?
  • Environmental factors and “green” issues.
  • Natural hazards, eg, fire, flood, storm damage. Is your business insurance fully up to date and adequate for your purposes? In particular, is the building insured for the appropriate reinstatement amount?

When undertaking a business risk assessment, the first task is obviously to identify any potential areas of risk for your particular business, based on your individual circumstances. You then need to quantify and evaluate those risks, before considering how to prevent their impacting on your business, or at least controlling and minimising that impact.

Once you have done that you will hopefully be able to decide on the best way forward. This could take the form of an overall plan divided into actions to be undertaken immediately, in the relatively short term and over a longer period.

Whatever your business, it would be well worth your while to take some time and undertake a risk assessment. The time involved will not be wasted, and it may prove to be an extremely valuable exercise.

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