After networking on White Bison’s sunny, creekside patio, attendees of VVBW’s June event learned tools and techniques for dealing with risk. Individuals either talk themselves out of exploring new ideas because of the risks that can go wrong, while others jump right into opportunities without preparing for what may go wrong. Presenter Barb Waters shared simple steps to analyze risks objectively and to make sound decisions for personal and business success.
The first step to effectively analyze risk is to identify any potential risks, or “what ifs.” By using a brainstorming or a “what-if analysis” technique, you can ask yourself what might happen to disrupt your business (or your personal goal). Examine different scenarios that may occur, like a recession, personal illness or property damage.
Now that potential risks are identified, it’s time to compare and rank those risks. Breaking down possible risk sources helps to reveal why certain risks may occur, establish the likelihood of each risk happening, and the cost or impact if the risks arise. Rank each risk using this criteria; the likelihood of it happening, and the possible impact if it does happen (see charts in blue). For example, consider property damage, such as a fire. A fire is unlikely in a business office, as compared to a bakery, but would be high impact due to loss of computer and office equipment.
The final step is to plan risk responses. There are four responses to consider.
- Avoid the risk by ensuring it doesn’t happen.
- Mitigate the risk by reducing the probability or impact.
- Transfer the risk by ensuring a third party assumes some risk.
- Or you can accept it might happen and do nothing.
Categorize risks to be prepared take appropriate and efficient action. Businesses commonly develop plans to respond to threats, but this can also be done on a personal level. For example, having funds in savings in case of a job loss or serious illness. Businesses also create risk register documents, which act as a permanent record of concerns. Risk registers can be used as a checklist to review risks on a regular basis, such as annually. This helps you keep track of changing risks, risk threat levels and ways to adjust your risk responses accordingly.
According to Waters, the more research an individual does on a potential project or business undertaking, the better prepared she can be to address risk and enjoy an improved relationship with risk!