How to Formally Manage Business Risk

I was listening to a reporter interview a soldier turned entrepreneur this past Veteran’s Day. She drew a straight line between the risks in war to those of going into business. She assumed he would be well prepared for the one because of his experience with the other and, by extension, that war prepares you for business.

With all appropriate respect to Sun Tzu and The Art of War, her line of questioning assumed that risk and danger are the same.  They are not.  Not really.

Sun Tzu introduced us to many lessons that are easily transferred from his writings about war to competing in business. He gave us lessons in leadership, planning, focus on mission, mission creep[1], and adjusting plans when the original ones go awry.  I felt, however, that she missed the bigger picture for the sake of a sound bite.

When we think about risk and danger as synonyms, we mischaracterize risk as something to be avoided. I would prefer to think of it as something that can be managed.

Business Continuity Risk Management

I am not saying that risk and danger are unrelated.  I am saying the former can be managed.  In business we are constantly managing the risks that conspire to interrupt or otherwise imperil our businesses and the lives of all those depending on its survival.

Business continuity risk management is one such practice that anticipates an event disrupting your business and potentially putting an end to it.

Wikipedia describes business continuity planning as the process of creating systems of prevention and recovery to deal with potential threats to a company. Any event that could negatively impact operations is included in the plan--supply chain interruption, loss of or damage to critical infrastructure, etc.

The typical process includes: analyzing the current situation, designing solutions, implementing those solutions, testing them for validation before accepting them, and finally maintaining the plan.

That “current situation” stage may be one of the most important. In this stage each functional area of the business is evaluated for vulnerabilities. his first step sets the stage for minimizing the impact of potential danger.

One company, whose board I serve on, is going through this process right now.  Their focus is on the vulnerabilities that might exist within the IT systems. This is but one functional area for you to consider in your family business.

James Randolph is one of our team members. His expertise in business continuity planning in Tampa Bay can help you get the process started. He can help get you on your way to reducing the danger your family business faces by managing the risks, not avoiding them.

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[1] Mission creep a gradual shift in objectives during the course of a military campaign, often resulting in an unplanned long-term commitment.