Risk management is an essential skill for a business leader. In the process of scaling up your business, you need to be able to assess possible threats and uncover opportunities with a sharp eye. Scaling Up coach Glenn Marvin explains the six practical tips you can implement to make the best decisions in this exciting journey.
As you grow and scale your business, taking risks becomes an inevitable part of the process. More responsibilities, more projects to take on and generally, a higher commitment towards substantial growth.
While possibilities multiply, you must also assess each potential risk with informed criteria. Not all risks are equal, and success largely depends on making calculated decisions. Though you can try everything and anything, that approach is not sustainable.
Scaling Up coaches have extensive experience working with leadership teams and can recognise the importance of identifying and mitigating risks to help you achieve strategic objectives.
Founder of Connect The Dots and certified Scaling up coach Glenn Marvin has over 17 years of experience helping businesses grow and will share with you six practical strategies you can implement to help you make informed decisions, better calculate trade-offs, and achieve long-term success.
Let’s dive in.
6 Tips for Mastering Risk Management When Scaling Up Business
1. Brainstorming All Possible Risks
When developing a plan, Glenn states: “The first step is to brainstorm all potential risks that your business may encounter”.
This process encompasses both internal risks related to your organisation’s capabilities and external risks that may impact your ability to execute your plan effectively.
Creating the right context and mindset for this brainstorming session is crucial to ensure a comprehensive exploration of all possibilities.
Once you have an extensive list, you can begin the process of filtering and prioritising.
2. Determining the Likelihood of Occurrence
Using the list of risks generated through brainstorming, assessing the likelihood of each risk occurring is essential.
Glenn suggests employing a rating system, such as a scale of 1 to 5 or a high-medium-low classification, which enables a quick and structured evaluation.
“Teams often make the mistake of focusing solely on specific risks,- says Glenn – and then they neglect general risk categories that may pose higher probabilities”.
By emphasising categories and types of events, you can capture a more accurate representation of the overall risk landscape.
3. Assessing the Impact on Your Business
Once you have determined the likelihood of each risk, the next step is to evaluate its potential impact on your business and project.
Similar to the probability assessment, categorising the impact on a scale allows for adequate visualisation and comparison.
Glenn recommends plotting risks on a probability-impact matrix to provide insights into their intrinsic relationships. This helps guide the decision-making processes with significantly less friction.
4. Ignoring Low-Impact Risks
“Low-impact risks, regardless of their likelihood, should generally be disregarded”, says Glenn. “These risks are not worth investing excessive time, energy, and resources into managing and mitigating”.
Instead, they can be addressed as they arise without compromising your strategic focus.
Unfortunately, many teams fall into the trap of diverting attention to these low-impact risks, leading to inefficient resource allocation.
5. Creating Action Plans for Low-Likelihood Risks
Glenn advises: “For low-likelihood risks that possess significant potential to impact your business or project, it is prudent to develop action plans”
These plans outline the necessary steps to be taken if the risks materialise and aim to minimise their effects.
Examples of such programs may include obtaining insurance coverage, establishing backup strategies, or devising alternative approaches.
6. Adjusting Plans to Mitigate High-Likelihood Risks
High-likelihood, high-impact risks demand substantial attention, resources, and planning efforts.
The primary objective for these risks is to explore how you can modify your plans and strategies to avoid them altogether.
Glenn shares: “If avoidance is not feasible, developing mitigation plans becomes crucial”.
These plans may involve implementing redundancies, seeking risk-sharing agreements with third parties, or creating alternative paths to navigate through the risks.
By employing a systematic approach to risk management, you can ensure that your business is well-prepared to navigate challenges and capitalise on opportunities.
Taking calculated risks, evaluating their likelihood and impact, and developing appropriate action plans are critical elements of this process.
“It is also essential to establish a continuous monitoring system to detect shifts in risk probabilities and respond promptly”, adds Glenn.
As you gain proficiency in assessing and categorising risks, you will become more adept at making strategic decisions that enhance your chances of success.
Mastering risk management is an ongoing journey that requires vigilance and adaptability.
You can start implementing the strategies we have mentioned to effectively balance the downsides and upsides of risks, enabling your business to thrive in an ever-changing landscape.
The road to growth is full of trial and error, but you can still estimate the extent of a challenging situation and deem it properly on time.
If you want the help of a Scaling Up coach at any stage of developing your business strategy, book a 20 min Discovery call with Glenn Marvin to find out what you can do to propel your company’s growth.
And if you need some insights on where to start, you can take the Full Scaling Up Assessment, which usually has a cost of $1500, but you can get it for FREE only through the button below.