Risks assessments identify potential hazards and their consequences. Companies use these to try to reduce business risks, create disaster recovery plans, and also purchase insurance for what they cannot completely control. According to the U.S. Small Business Administration, about a quarter of small businesses never recover after a disaster. Vulnerable companies need to identify potential problems in order to make plans to eliminate or cope with them. Of course, businesses also use this information to cover any risks that can't be completely controlled with proper insurance.
How to Create a Simple Risk Assessment for a Small Business
According to Ready.gov, risk assessments spot potential problems, but a business impact analysis identifies how these problems might affect a particular business. Since these two tasks go hand-in-hand, it is useful to describe them together. These are the three steps of a risk assessment and business impact analysis:
- Identify Hazards: This step consists of simply listing which business risks a particular company might face. These could include acts of nature, fires, mechanical breakdowns, and even cyber attacks.
- Identify assets that could be risked: This step consists of identifying which business or external assets might be damaged by one of the hazards listed above. Some common examples are employees, customers, buildings, a business reputation, and the environment.
- Analyze the impact: The last step consists of figuring out what sort of harm could be done to the company assets. For example, the company could lose money in a lawsuit if a person gets injured, it could get fined for being out of compliance with regulations, or it might suffer a loss of customers after a cyber attack steals personal information from a sales database.
After analyzing all of these reports, whoever acts as the company's risk manager can try to mitigate each risk. For example, a safety program, smoke detectors, and fire extinguishers might reduce the risk of accidental fires. Better security could reduce the chance that hackers can steal valuable data. Of course, no company can take steps to totally eliminate every threat, but this is a good first step.
Next, this assessment will help companies buy the right insurance to protect them against the things that they cannot control. The more steps that companies do take to minimize threats, the cheaper that insurance premiums are likely to be. Risks assessments and impact analysis can help prevent losses and result in cheaper insurance premiums. For more ways to improve your risk assessment skills try these tips.
Who Can Help With Small Business Risk Management?
On the topic of insurance, many agencies and insurers provide risk management services to their clients. Since these professionals make it their business to understand and reduce the risks that their clients face, they are often in a very good position to offer advice.
At Ventiv Technology, we've been in the business of helping all sorts of companies manage risk for over four decades. Our software solutions can help integrate risk management into every facet of business operations. Find out more about Ventiv and how we can make your company less vulnerable to risks.