Every business has risk associated with it. Sometimes it is easy to see, sometimes it can catch you by surprise. The best strategy for risk is not to hide from it but embrace it, understand it as best you can and then mitigate when possible. This is quiz gives you a good foundation to start thinking about, analyzing and mitigating risk.

Question 1. What is the number 1 risk to your business. How long did it take you to think of it?

 

  1. Instantly
  2. 10 seconds
  3. 30 seconds
  4. 1 minute
  5. Still thinking
Answer 1.

The shorter the better! If you are still thinking, that is OK but it means you need to get to work. The first step is identifying what risks your business is exposed to. Every business is different so there is no one golden rule.

Question 2. Do you know your debt/asset ratio?

 

  1. Yes
  2. No
  3. Wha?
  4. Kind of
Answer 2.

Answer 1 is the most ideal outcome. If you don’t know, you should consider working it out. A metric for understanding a businesses financial health is how much debt does it have VS how much does it own in assets. It isn’t a one size fits all rule. For example, businesses during growth periods can often take on additional debt to support growth. This doesn’t mean it’s a bad business but its very much something to stay on top of.

Question 3. If your provide credit to your customers, what checks do you do before giving them an account?

 

  1. None
  2. Reference check
  3. Credit check
  4. Directors Guarantee
  5. 2 + 3 + 4
Answer 3.

The more the better! When you are giving someone your money, your risking a big part of your business, your operating capital! Plus there is no guarantee you will get it back.

Asking for a reference of another account they may have is a good start. If they pay that often, good early signs. If not, start to reconsider.

It’s easy and cheap to run a company credit check so why don’t you? If a business has adverse history on their credit file, do you want to be the next court action?

Directors Guarantees mean that if something happens to the business, the directors will guarantee any debt left behind.

Credit has been a concept for thousands of years however when its your money, make sure YOU are comfortable with where it is going.

Question 4. How many key people do you have in your business?

 

Key people are people that your business depends upon to keep operating.

  1. 0
  2. 1
  3. 2
  4. 3
Answer 4.

More is less here. If you have any amount, whats your plan if something happens to them?

If your business relies on someone in particular to keep money coming in the door or to keep the cogs turning, you need to consider what happens if something happens to them! A good plan is key and don’t be scared and shy away from a topic like this. A good option to consider is ‘Key Person Insurance’. It can help financially assist if something was to happen to a key person.

Question 5. Do you provide professional services? If so, do you have professional indemnity insurance?

 

  1. Yes
  2. No
Answer 5.

This is an easy one! If you are a professional, providing a service or advice and don’t have professional indemnity insurance, the question is why not!

If you make an error or omission during the course of your work and you cause your customer some sort of injury or loss, you could be liable. Professional indemnity insurance can help protect you.

 

Risk is everywhere. Business is no exemption.

Don’t shy away from risk.  Identity it, understand it and mitigate it!