Covering all bases (risk management)
Covering all bases (risk management)
Peart M. NZ Business, November 2006, Vol. 20 No. 10, Start page: 37, No. of Pages: 5
Purpose – to explain why even small businesses need a risk management strategy. Design/methodology/approach – Explains that risk management involves careful analysis of the risks that a business faces. States that managers can then determine which risks can be eliminated or transferred to another party, where negative effects of the risk can be reduced and where the business might decide to “live with” some or all of the consequences of a particular risk. States that where the business is not prepared to accept a risk, insurance may offer a solution, but points out that the costs of protection from a catastrophe may very large compared to the probability of it occurring. Gives examples of fire, flooding and earthquake as mission-critical risks for which insurance may be required, whereas a nuclear attack or an asteroid hitting the earth would be catastrophic but less likely to happen. Distinguishes between three types of risk: opportunity-based, uncertainty-based and hazard-based risk, giving examples of each. Practical implications –Advises managers of small and medium-sized enterprises to set aside some time to consider the essentials of risk management, covering such things as supply continuity, utilities, staff, means of production and financial services. Originality/value – A basic overview of risk management for small businesses.
Keywords: Insurance, Managerial strategy, Risk management, Small enterprises
