One of the latest buzz phrases in the business media is enterprise risk management. “Surely this is just for big corporates,” some people will say – and actually no! Every business faces risks and it is important to review where your business stands and what you can do to mitigate your risks. Enterprise Risk Management, or ERM, is a meaningful label for what should be a front-of-mind issue.
Obviously risk is everywhere and as a business owner you will already be dealing with risk on a day to day basis. But what you probably haven’t done is think about and document your risks. Getting clarity from the process of doing this will help you to determine what is a priority to mitigate, and what you just need to think about as part of your disaster recovery plan. The business problem is that it is no longer good enough to avoid reviewing your business risks. If you are a bigger business then you probably label this a corporate governance issue. ERM, corporate governance or just being prepared, whatever you call it, this is really important – businesses tend to fail if they don’t manage their risks properly!
Which brings me to the point of this article – what might you review as part of thinking about your risks? With every risk the questions to ask yourself is, what does it mean for your business if this risk happens – and what can you do to mitigate it or to help prevent it? So this is really an application of good old fashioned SWOT theory.
Here a few points to get your thinking started:
• Pandemics – might there be another countrywide or global health issue? In 2020 we had a huge risk thrust upon us – the Covid19 pandemic – and this is still with us.
• Digitisation – this is actually a really wide area of risks;
o might there be a sales channel risk, ie you need to shut your store because customers are shopping online rather than physically?
o If you have an e-commerce presence, will it scale, does it need updating, and is it fit for purpose?
o are your office processes all online and appropriate (and if not why not?)
o what happens if (or when!) you have a GDPR data breach?
o what about cybercrime and data stewardship? (See our recent article on this topic: Are you taking cyber crime seriously?)
o What about social media, online reviews and reputation management?
• Mental Health – long-term staff absences cause every business grief, not to mention the personal cost to the individuals and their families
• Low Carbon Economy – this is another wide area of risks (see our recent article for more info: Heading Towards Net Zero):
o are you doing your bit?
o what more can you or should you do?
o what will known government regulation do to your business?
• Future developments – what products/services are in development in your industry and how will they affect your business in the future.
• Inflation – it is always with us, although it waxes and wanes as the economy develops. How will it affect your business this year and next?
• Government regulation – Brexit has been the most recent big change. What else is in the various party manifestos?
• Where are your supply chains? How robust are they?
• …and there are going to be lots of other risks to think about.
As accountants and advisers, we can help by explaining the facts and helping you to identify the risks and possibilities behind your numbers. The answer is that we can help you to break your numbers down and put them into context for what different risks might mean to your business. Contact us today for some help.