What would happen if 20% of your employees got a better offer from your competitor and left? Or, if you got hacked and lost all your files?
These things happen unplanned. But, there is a way to lessen their impact, even prevent them from happening.
It’s simple - all you have to do is make a list of all the things that could go wrong, define their impact, and make a backup plan.
Think of yourself as Ebenezer Scrooge from “A Christmas Carol” that gets a rare opportunity to see the future and become a better person before it’s too late.
How to approach risk management
You don’t need any fancy software for risk management. A simple spreadsheet will do.
The whole point of the activity is to think about all the bad things that could happen and be prepared in case they do.
Don’t get attached to making the spreadsheet pretty. You don’t need an exhaustive but ultimately useless list. The point is to get your mind going and letting your thoughts simmer and work in the background. The document itself is irrelevant; what’s relevant is the journey.
Start by outlining types of risk and coming up with things that could go wrong, like:
- Site is down due to DDoS
- New version of Ruby breaks your app
- Wifi is down for a whole day
- Your presentation doesn’t work on older machines
- Client pushes for earlier deadline
- Client doesn’t likes your work
- Client decides to completely change the project
- Your key client left you
- You can’t hire new employees on time
- New employees don’t have the right skills
- A key member leaves
- Employees ask for remote work
Legal & Finance
- You forget to renew the office lease
- You get sued for copyright violation
- Invoice isn’t paid on time
- A legal agreement takes longer than you think
- You don’t qualify for tax exempt no more
Contractors and Suppliers
- A contractor doesn’t respond to email
- They charge more than agreed
- They don’t deliver on time
- They’re work is not as good as you thought
- The initial estimate is way off
- You lose all your files
- Project scope got bigger
- Defects are found before shipping
- Not enough resources
Next, assign a probability to each risk:
- 1 - there’s a theoretical chance but nothing to worry about
- 2 - could happen, but won’t hold my breath
- 3 - better to cover my bases
- 4 - highly likely, must have plan B
- 5 - seriously need to reexamine my business
Then, assess the severity should the risk happen and the impact it’ll have on the business:
- 1 - a slight bump in the road
- 2 - no need to panic, we’ll manage
- 3 - tense workplace and lots and lots of overtime
- 4 - only a miracle can save us
- 5 - prepare documentation to file for bankruptcy
Calculate each risk score by multiplying probability and severity. Then apply conditional formatting so you can see at a glance what your highest risk is.
Finally, think about what would be the best thing to do if a risk occurs. Write what you’ll do to avoid the risk and lessen the impact should the risk occur.
By thinking about all the possible things that can go wrong, you begin to spot your weaknesses and can work on preventing them:
- There’s a real possibility you’ll catch a virus and lose all your documents? Make a recurring task in Active Collab that’ll remind you to backup files every 1st of the month.
- Client refuses to pay unless you can show them where each minute went? Start encouraging your team to track time and writing a short note, indicating what they did.
- Your team is spread too thin and you can’t finish projects on time? Start your day by checking the Team Timeline report so you can see how much work each team member has.
Other posts in the series on growing a business
- Part 1: Why entrepreneurs burn out
- Part 2: How to make sure your business can grow
- Part 3: How companies grow and die (Adizes lifecycle)
- Part 4: Setting up a self running business
- Part 5: Introducing processes
- Part 6: Staying relevant
- Part 7: Staying profitable
- Part 8: How management changes (Greiner's growth model)
- Part 9: When to hire first project manager
- Part 10: A practical approach to risk management
- Part 11: Identifying key players
- Part 12: What happens when a key player leaves
- Part 13: Leadership pipeline
- Part 14: When to hire first HR manager
- Part 15: Contractor vs full-time employee
- Part 16: Hiring process for growing businesses
- Part 17: How and where to find talented employees
- Part 17: Hiring advice for growing businesses
- Part 18: Systematic onboarding
- Part 19: Avoiding toxic workers
- DOWNLOAD THE WHOLE EBOOK (PDF)
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