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Having a positive outlook on the future is essential as a business owner, but being aware of potential risks and preparing for the worst-case scenario is equally important. Regardless of the size of the business, continuous business planning ensures the business survives challenging times.
Make sure you have an umbrella ready for rainy days. Business continuity planning is an effective method of preparing for such events:
Business continuity plans contain three major components: risk management, business impact analysis, and incident response.
Risk management is about identifying and assessing risks, developing strategies to manage them, and helping your business recover quickly if an unexpected event occurs.
A risk is any event that negatively impacts your business or ability to achieve your objectives. Prior to implementing a business continuity plan, it is crucial to fully understand your business goals.
Identifying potential risks
Prepare a list of all the negative events that could potentially happen and negatively impact the business. Think about anything that might threaten the business' success. Apply what-if scenarios and be as detailed as possible. Getting the best results requires brainstorming and research, so get your team involved in this process.
Defining risk categories (risk library)
There are several types of risks, each of which is organized into risk categories. Financial risks, operational risks, strategic risks, and market risks are some of the most common risk categories. By categorizing similar risks, risk management strategies can be developed more effectively for each type/category of risk. By the way, Numberoo can assist you with implementing tools to eliminate financial business risks.
Assigning risk owners
A proven method for managing risks is to assign a responsible person to each risk category. The role of a risk owner is to manage, monitor, and control identified risks, as well as to implement selected strategies and respond to incidents.
Analyzing and evaluating risks
After identifying and structuring the potential risks, the next step is to analyze and evaluate the likelihood and potential consequences of it happening (scale: level 4 very likely - level 1 very unlikely). By doing so, you will be able to prioritize risks and identify what risks need immediate attention and what can wait.
Business Impact Analysis is a more detailed analysis of the operational and financial impacts of business disruption due to unforeseen events. BIA is an excellent tool for developing risk management policies and recovering from emergencies. Building a recovery plan begins with knowing the consequences.
Some common business impacts are listed below:
- A decrease in revenue
- Late customer payments
- An increase in expenses
- Dissatisfaction among customers
- Delay in achieving business goals and objectives
In case of an emergency, an incident response plan outlines what steps need to be taken to minimize loss and prevent further damage.
Recovery plans enable you to minimize business losses and speed up the recovery process. It is a step-by-step guide on how to recover as quickly as possible after an incident. It outlines how your business can get back on track.
You can also use a recovery plan to determine what you can do today to prevent business losses, such as getting your business insured, ensuring you have savings, etc.
A business continuity plan should be reviewed and updated at least every three months. Here is more detailed information about each step in the business continuity planning process: Preparing a risk management plan and business impact analysis | Business Queensland
By implementing financial tools for managing and controlling your finances, numberoo can help you eliminate financial business risks. Book your free consultation today!
