The prospect of starting a business can be extremely daunting because no one ever knows what tomorrow might bring. Even so, no one goes into business expecting failure but the truth is, in some areas of the world as many as half of all new businesses (in some places more!) will fail. In Australia, as elsewhere around the globe, the reasons for businesses going under generally fall within a few categories. If you want to mitigate the risk of failing, it is wise to understand where your biggest risks will occur and from there do what you can to mitigate risks.
Areas Where Risk Is Concentrated
There are several areas within your business that risk is higher and so carries more weight. Others are less likely to happen or will have few serious consequences, so although they cannot be totally ignored, they can be set aside in favour of risks of greater importance. The key to managing risks is to look at the areas of your business that would cost the most if a loss should occur so that you can begin to take steps to prevent any sizeable loss.
For example, if you hold all your printing supplies in a cupboard below where the roof suddenly springs a leak, you are liable to lose all your supplies but the loss would be minimal compared to a leak that sprung over a piece of hi tech equipment that runs in the tens of thousands to repair or replace. The first order of business then in minimising future risk is to assess where loss could hurt you most.
Valuing Your Inventory & Machinery
It is hard to envision a new business just starting up and suddenly losing valuable equipment. Being in line for seasonal monsoons, countries like Australia can quickly come under severe torrential downpours and high winds. Also, some of that equipment is dangerous to use at the best of times and one serious injury could kill or maim a worker for life.
Although you can be heavily insured against loss, if you are in violation of safety standards, you could be in violations that nullify your insurance or go beyond the limits set in your policy. You can use tools like Plant Assessor to ensure your plant and equipment is safe and meets legislated safety standards.
Plan for the Best – But Always Be Prepared
The bottom line in terms of risk management for startups is that you take the time to be aware of where the greatest potential for loss can occur. You are sinking everything you have into starting your business and one accident or market variable can force you to close your doors almost before you’ve got them open.
Risk management should always be a priority for startups because you never know when and from where disaster can strike. Don’t assume that you are safe just because you are new and unlikely to face any calamities this early in the game. Keep Murphy’s Law in mind and work forward from there.