By Kevin Jessop
Entrepreneurs are optimists and always see the glass half full. Being an optimist does not require that an entrepreneur ignore risks. Good risk management prevents the alligator in the swamp from taking the company down. A person may not always see the alligator, but he is always there. Risk management matters to startups because of the following five reasons:
The existential risk is HUGE! There are so many threats to a startup business’ existence that management should spend a few minutes listing a few of them and developing strategies to eliminate, mitigate or transfer the risks.
Saving cash is critical to startups. Insurance is rarely the first nor best response to risk management. Sometimes risk management is merely acknowledging the risk and naming the elephant in the room.
Preparation now saves $$ later. Being prepared for the inevitable calamity saves both time and money. Well-thought-out plans get people back to their jobs as quickly as possible so that employees can keep doing the great things that they do.
Peace of mind keeps people productive. People are at their best when they feel secure in their jobs and have confidence in their leaders and managers. Leaders create confidence when they tackle problems in an orderly and efficient manner without threatening jobs nor the very existence of the company.
YOLO (You Only Live Once.) 80% of all startups will not survive a shutdown of more than 2 weeks. A temporary shutdown should not derail a company. Cash flows dry up when supply chains are disrupted, and creativity evaporates as people worry about the company’s future. Disaster management plans and sometimes business interruption insurance can be literal lifesavers.
A risk management action plan for business should include three things:
Identify company risks. Every company is unique but all startup companies have similar risks and paths that they follow. Rely on trusted advisors both inside and outside of the company to develop a list of the most pressing risks. Rank the top 5 or 10 risks from worst to least bad.
Make a plan to manage and mitigate the top risks, then execute the plan. Plans to manage risk can include disaster recovery, data backups, and hiring plans for key persons or special skill sets.
Revise the plan as circumstances change. The keys to successful plans are
executing quickly and adjusting as needed.
About Kevin Jessop, Chief Marketing Officer, Diversified Insurance Group
Diversified Insurance is a full-service insurance agency, benefits consultant and risk management consultant. Diversified’s understanding and experience in the Industry is unparalleled, offering expertise and analysis to guide clients in making proper risk management decisions. From the beginning, Diversified has targeted businesses with complex risk profiles. Diversified makes the complex simple and understandable to help clients make the best risk management decisions at the lowest possible rates.