Murphy’s Law states that “if anything can go wrong it will.” While most
of us are a bit more optimistic than this, anyone past the age of 20
generally understands that, sometimes, the unexpected happens. For a
small business, this can be anything from an armed assailant walking
into your operation to a power failure or even a personal health crisis.
When bad things happen to good businesses
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Murphy’s Law states that “if anything can go wrong it will.” While most of us are a bit more optimistic than this, anyone past the age of 20 generally understands that, sometimes, the unexpected happens. For a small business, this can be anything from an armed assailant walking into your operation to a power failure or even a personal health crisis. All businesses encounter unexpected curve balls but it’s the small businesses that are generally more vulnerable to the financial losses that can occur due to some kind of emergency. After Hurricane Katrina had devastated New Orleans, AT&T commissioned a survey and discovered that one-third of 1,200 companies surveyed had no disaster recovery plan. It’s therefore even more important that a strong risk management strategy is in place. When it comes to business risk – are you more exposed than you need to be?
A strong risk management strategy does not need to be formal. It does need to have contingency plans in place for whatever surprises might occur. Your plan also needs to account for employee training in how to handle these surprises. What kinds of surprises? It could be the river in town overflowing and flooding your place of business. It could be you having a heart attack unexpectedly. It could be your best supplier closing its doors.
Risk management involves five steps:
1. Identifying the risk
2. Quantifying the risk – how much could it hurt your business?
3. Identifying ways to limit the risk.
4. Putting a plan in place should the risk occur.
5. Continuously monitoring the plan.
This may seem like a daunting task but if you set aside a couple of hours, you can probably tackle the biggest issues. Anything is better than nothing. To get you started, here are a few areas worth considering.
Employee Safety:
Do you have a health and safety committee to meet regularly and discuss things like fire alarms and drills as well as hazardous material handling? Have you made it clear to staff what procedure they’re to follow in case of an armed robbery? Do your delivery vehicles have a regular maintenance schedule and do you document it?
Insurance:
Do you have enough coverage for fire, flood or theft? Keep an off-site list and photos of your equipment to help speed insurance claims. Who’s driving your company vehicles? Do you know whom you’re hiring? That new employee may be the salt of the earth or they may have a driving record that will shoot your insurance premiums through the roof. If they’re using their own vehicle for delivery does your insurance protect you from any lawsuits that may arise due to serious injury?
Data Recovery:
Do you back up your data? What would happen if your hard drive crashed or if someone hacked into your database? All of those addresses and credit card numbers would be lost as well as accounting information. Store your data securely and save information regularly. Back up your computer data and keep the information in a different location, ideally at least 50 kilometres away from your business. You could simply mail your backup disc each week to a contact in another city. Consider subscribing to a backup service. Some simple backup services like “Bell Business Backup” are specifically geared to small and medium-sized business needs and are advertised starting at $4.95 per month for Bell subscribers. Keep photocopies or scanned copies of important paper documents like licences or insurance policies outside the office. They won’t be much good to you if there’s a flood and it’s under three feet of water.
Privacy:
Are you vulnerable to a complaint under the privacy legislation? Do you have the expressed permission of all customers you send marketing materials to? If they gave you their address to make a delivery, that doesn’t mean you can use it to send notices of specials or new products. Make sure all sensitive information is held in a secure place and hard copies of invoices are shredded when it’s time to dispose of them.
Business Interruption:
What will you do if your business is without power for several days? What if there is a natural disaster or vandalism? Make a list of employees who know first aid or CPR or who have ham radios. Get 24-hour contact information for all employees. Set up a phone tree or other plan to keep employees informed. Arrange for two-way radios, pagers or text messaging if the phone system goes down. Some businesses have made arrangements with other operators to share facilities in the event there is some unforeseen occurrence that interrupts the business flow. It may be worth approaching another garden centre to forge an alliance that both of you can call upon should the need arise.
Succession Planning:
Who will run the show when you take vacation? You do take vacation, don’t you? Are you planning to retire in the next ten years? If so, are there children who may wish to take over the business? Is there a keen employee who may wish to buy you out? Start to identify to whom you will pass the torch and then bring them along so when the time comes the transition will be smooth. If you will be selling the business, a strong risk management policy will enhance its value.
Supply Chain Integrity:
Are your suppliers in good financial shape? What if someone goes under all of a sudden? Make sure you have already identified alternative sources for comparable products? Many of our botanical elements come from all over the world, and with political unrest becoming more prevalent, consistent supply is a real concern. If you have a vendor qualification and certification process, get that out of the way now so if push comes to shove, you won’t have to scramble to get someone approved.
Import/Trade Issues:
Are there any import regulations that may change and negatively impact your business? Ask your distributors to keep you apprised of any pending issues. Do you need to revisit any pricing decisions because our strong dollar has dipped in value and perhaps your costs have increased?
The book Contingency Planning and Disaster Recovery: A Small Business Guide, by Donna Childs and Stefan Dietrich is a good resource. This book grew out of Childs’ experience shepherding a small business through the World Trade Center tragedy. To kick off the risk management process, simply get a big binder and label dividers with each of the topics listed here. You’ll likely be able to think of a few more that are specific to your business. In each section, list the five steps mentioned at the beginning of this article and then systematically define a plan for each one. Sometimes plan A is no longer an option, and in that case it’s always good to have other options. That’s why they call it “plan B.”
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