What Keeps You Up at Night? Managing Financial Risks (Part 2): Implement a Risk Management Plan
Note: This blog is the second in a two-part series on managing financial risks to your organization, and focuses on implementing a plan of action.
In last month’s article, I introduced the concept of financial risk management and why it’s an important process for small businesses and other organizations to take a disciplined approach, to beat the odds of financial failure. I also covered the first two important steps of identifying and assessing potential risks. Even if you’ve completed those steps, there’s still the important task of taking action to address your key risks. Let’s get started so that you can sleep better at night!
What Actions Should I Take? Implement a Plan
Implementing a plan of action to address your highest risks is the most critical part of the process. For example, let’s say you’ve identified profitability as a key risk – that is, the risk that your profit margins are too low to sustain your business (or for not-for-profits, your ability to maintain sufficient revenues over expenses to fund programs and services). You’ll want to brainstorm on what types of steps can be taken to manage this risk. If you employ a bookkeeper or accountant, get his or her input as well.
Illustrative Example: Action Plan to Address Profitability Risk:
What Happens Next? Monitoring Progress
Financial risk management is an ongoing process, not a one-time event. Be sure to monitor how well your action plan is working to address your risks and adjust as needed. Also remember that your key risks may change over time, based on both external and internal factors.
An Ounce of Prevention Is Worth a Pound of Cure
You may feel like there’s not enough time to do the above approach, given all of your other priorities. However, it’s better to be proactive now and take control of your destiny; the hardest part is just getting started! If the above tasks still seem daunting to you and your staff, consider hiring an outside consultant to lead you through this process. A seasoned professional will be knowledgeable about the wide range of risks that practices like yours face and can help customize a risk-management plan that works for your specific business or not-for-profit.
If you have questions and/or would like to understand more about managing financial risks, please reach out to me, I’ll be happy to talk with you. Orin Schepps, Founder and CEO @consultanceaccounting https://www.consultancellc.com