risk management - lzacc.com · riskmanagement . 31 . equipment and vendors • inclusion in initial...
TRANSCRIPT
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Risk Management
FOR A SMALL BUSINESS
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RISKMANAGEMENT 2
Welcome
1. Agenda
2. Ground Rules
3. Introductions
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RISKMANAGEMENT 3
Objectives • Identify the common risks associated with
a small business
• Identify the external and internal factors which affect risk for a small business
• Identify situations which may cause risk for a small business
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RISKMANAGEMENT 4
Objectives • Indentify the common warning signs of
risk for a small business
• Implement, monitor, and evaluate a risk management plan for a small business
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RISKMANAGEMENT 5
What Do You Know?
What do you know or want to learn about risk management?
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RISKMANAGEMENT 6
Risk Management • Identifying areas of threat to the business • Assessing the potential impacts and
managing these • Growth and continued existence of the
business
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RISKMANAGEMENT 7
Discussion Point #1: Risks from Positive Situations
What positive situations or opportunities can you think of that may be risks?
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RISKMANAGEMENT 8
Internal Risks
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RISKMANAGEMENT 9
Human Risks • Death
• Owner • Employee
• Illness • Short term • Long term • Indefinite
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RISKMANAGEMENT 10
Human Risks • Theft and fraud
• Product and inventory theft • Time sheet fraud • Accounting and cash fraud
• Low morale, dissatisfaction • Failure to perform • Sabotage of systems,
equipment or customers
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RISKMANAGEMENT 11
Equipment and Information Technology Risks • Equipment breakdowns
• New equipment integration • Worn older equipment • Damage to vehicles
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RISKMANAGEMENT 12
Equipment and Information Technology Risks • Information technology downtime
• Lack of backup or recovery system • Updates and repairs • Power and connectivity (physical damage and
outdated systems) • Lack of administrative controls
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RISKMANAGEMENT 13
Other Internal Risks • Physical plant repairs
• Breaks in lines or utilities • Routine maintenance
• Incidents • Work related injuries • Damage to others’
property by employees • Damage to your property
by others
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RISKMANAGEMENT 14
Other Internal Risks • Cash flow changes
• Unexpected costs • Loss of credit lines • Expenses to establish lines of credit
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RISKMANAGEMENT 15
Activity 2: Internal Risks
What other internal risks can a business owner control?
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RISKMANAGEMENT 16
External Risks
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RISKMANAGEMENT 17
Competition and Market Risks • Loss of clients or customers • Loss of employees • Decrease in sales prices/fluctuating
markets • Increases in vendor costs • Oil or gasoline price increases • Fixed cost changes (e.g., rent)
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RISKMANAGEMENT 18
Business Environment Risks
• Laws • Weather • Natural Disaster • Community
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RISKMANAGEMENT 19
Discussion Point #3: External Risks
You own a steak house. A tainted meat scare in your area changes demand. How do you manage this risk or control its effects?
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RISKMANAGEMENT 20
Personal Conflict Risks
• Family obligations, illnesses or deaths • Events of disaster that affect the home • Community involvement • Complacency
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RISKMANAGEMENT 21
Discussion Point #4: Risks to Continued Operations
What is required for your business to continue operations?
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RISKMANAGEMENT 22
Risk Identification
• Written business plan • Outside sources to assist in
identifying • Risks of your vendors or supplier • Business continuity assessment
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RISKMANAGEMENT 23
Warning Signs • Excessive debt in relation to owners
equity (total liabilities / owner’s equity) • Reliance on a small number of customers • Reliance on one product • Reliance on one or a small number of
vendors
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RISKMANAGEMENT 24
Warning Signs • Cash flow problems • Irregularities in accounting, bank or
timecard records • Irregularities in computer system
administrative reports • High employee turnover rate
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RISKMANAGEMENT 25
Risk Evaluation • Identify needs for business continuity • Identify needs for potential or planned
growth • Discuss risks with managers • Communicate risks to managers
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RISKMANAGEMENT 26
SWOT Analysis • Strengths • Weaknesses • Opportunities • Threats
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RISKMANAGEMENT 27
Other Resources
Small Business Administration
Audit Firm or CPA
Bank or Commercial
Lender
Risk Insurance Provider
Internet Source
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RISKMANAGEMENT 28
Risk Measurement • Effect on potential earnings and cash flow • Impact on the business for future growth • Costs related to the risk, should it occur • What would change in your business as a
result • Weighing costs versus the benefits of the
control
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RISKMANAGEMENT 29
Importance of Risk Management
Cash Flow Stability Credit Longevity
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RISKMANAGEMENT 30
Risk Control Management and Implementation
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RISKMANAGEMENT 31
Equipment and Vendors • Inclusion in initial written business plan • Readdress, monitor and update business
plan periodically • Insure equipment and use service plans • Know your vendors and suppliers –
backup relationships
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RISKMANAGEMENT 32
Business Continuity • Location to continue business operations • Establish a manual system • Train staff to continue operations • Backup operating systems, list staff
duties and contacts • Review contracts with vendors for
provisions • Know systems provider backup and
contingency operational plans
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RISKMANAGEMENT 33
Information Technology Systems • Do not share login information • Protect systems with firewalls • Institute levels of access • Perform other reports • Sample transactions or use
trial transactions • Conduct scheduled and surprise audits
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RISKMANAGEMENT 34
Competition • Shop them • Check advertising • Product lines • Pricing • Customer interaction • Employee retention
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RISKMANAGEMENT 35
Activity 5: Assets
What is your most liquid asset? How can you protect it?
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RISKMANAGEMENT 36
Accounting and Cash Control • Separation of duties • Dual control of cash • Levels of authority observed • Periodic audits • Surprise audits • Insured deposits – FDIC • Plan for reserves in the budget
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RISKMANAGEMENT 37
Employee Management • Pre-employment screening and
background checks • Job descriptions and duties • Communicate clear expectations • Cross train staff • Identify temp agencies that specialize in
your field • Periodic evaluations and feedback
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RISKMANAGEMENT 38
Employee Management • Manage by being present or walking
around • Audit for payroll or time fraud • Benefits and compensation for retention • Incentives to avoid injuries and damages
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RISKMANAGEMENT 39
Business Work Strategy How can you manage your own risks?
• Set work hours • Plan work with a balance • Set realistic goals • Train support staff or an assistant • Include in disability or death in business plan • Support system • Anticipate family and home needs
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RISKMANAGEMENT 40
More on Control Management • Communication within organization • Routine assessment of physical plant • Be alert to changes in the community and
laws • Awareness of news in the economy • Utilize lines of credit only when needed • Insure against damages from weather and
disasters • Backup utilities – phones and generators
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RISKMANAGEMENT 41
Lead by Example • Ethical and honest behavior will begin
with management
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RISKMANAGEMENT 42
Exit Strategy • Include exit strategy in business plan • Revisit it periodically • Insurance payment and liquidation of
assets • Liquidation of assets without insurance • Trustee to handle • Family member • Employees
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RISKMANAGEMENT 43
Plan and manage risks to succeed!
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RISKMANAGEMENT 44
Eight Key Points to Remember • There are internal and external risks associated
with a small business • Begin assessing the risks by completing a list of
those events or resources involved with the business that could impact continued operations and cash flow
• The costs to insure or minimize risks should be weighed to the potential impact involved
• A business continuity plan should be part of your overall business plan
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RISKMANAGEMENT 45
Eight Key Points to Remember • Strategies to avoid risks can include:
communication, setting expectations, support systems, training staff, insurance, assessment and contingency planning
• Be honest in reviewing your business for risk and warning signs
• Seek assistance from others • An exit strategy is important
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RISKMANAGEMENT 46
Summary • What final questions do you have?
• What have you learned?
• How would you evaluate the training?
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RISKMANAGEMENT 47
Conclusion You learned about:
• Internal and external risks of a small business • How to identify and reduce the negative effects
these can have on your business • Warning signs of risk • The steps in risk management planning • The importance of containing these risks • The need for an exit strategy