Small businesses are vulnerable to many risks on a daily basis. Effective risk management is essential to ensure the long-term viability and sustainability of a business venture. More often than not, this responsibility falls on the shoulders of the entrepreneur or owner and this can be an added time pressure. However, it’s absolutely vital that risk management, largely in the form of contingency planning, is an important consideration when you start a business and even more so as it develops. In this article, we’ll explore what contingency planning is and why it’s so important for your small business.
What is contingency planning?
Small businesses contend with many risks and are often more vulnerable to these risks because they have fewer resources available and less expertise. Contingency planning is the process of identifying and preparing for certain events or factors that could disrupt the planned or usual proceedings of a business venture. These factors can range anywhere from natural disasters, such as flooding, to security threats, such as a cyber attack or physical break-in.
Contingency plans should be outlined, documented and made easily accessible for all relevant people at any time – because you never know when disaster can strike. You should have pre-prepared plans in place for how to respond or deal with certain possible events and take precautionary measures beforehand to mitigate these risks as much as possible. For example, it’s a good idea to have public liability insurance in place in case a customer is injured or harmed on your premises. Without this precautionary step, your small business could face significant costs and legal repercussions if you are found responsible for the incident – having potentially serious implications for your future viability.
Why is contingency planning important?
Respond more effectively to contingencies
Taking steps to plan and prepare for contingencies is important because it allows you and your business to respond and react more effectively to ongoing situations or events. This can be the difference between irreparable damage to your operation and less significant impacts from which you can recover. Faster response times are also critical in protecting members of the public and your employees in the case of potentially dangerous situations.
Some events such as flooding or attempted robberies are scary for anyone involved. Having a set plan in place to deal with such situations can help to reduce panic if and when such circumstances arise. For staff, having easy access to your contingency document will give them the ability to be calmer and collected when coming to terms with an emergency. In times of financial instability, clear plans can give your business and stakeholders a great deal of confidence that you will be able to navigate through hard times.
Minimise losses and damages
Small businesses don’t have the support structures and resources of larger corporations. Thus, any losses or damages can have significant impacts on your operation and its sustainability. Effective contingency planning can help to minimise any losses in many cases and ensure that you can survive and thrive on another day.