Risk Management for Entrepreneurs and Startups

I was recently asked to hold a seminar at an Indonesian shopping mall on the topic of “Risk Management for Entrepreneurs.”

For those unfamiliar with this area of the world, Indonesia has an enormous retail sector, which lends to the country having the largest GDP in Southeast Asia. Those who attended were primarily small shop owners (restaurants and cafés) as well as online e-commerce entrepreneurs.

The seminar took place in the middle of the mall, meaning the typical PowerPoint presentation wasn’t applicable. On top of that, the years have not been kind to my language skills – I used simple English to convey the message as best as I could.

I had planned to talk about famous risk takers like Christopher Columbus, Bill Gates and many others. However, I realized that my audience had no idea what I was talking about. I also realized that to get my point across I had to be brief. I needed to have graphics they could understand and things the audience would find useful.

There could be no talk about industry-related buzzwords, ISO 31000, etc.

We then concentrated on the basics of Risk Identification, Assessment and Management. And, we defined risk as being:

An uncertainty that, if it occurs, has an effect on objectives.

After laying out what our and our stakeholders’ objectives were, we talked about the risk management process and the Identify-Assess-Respond approach.

 

 

 

We decided to focus on traveling to the mall as our example for common risk management. We asked four primary questions

  • What am I and other stakeholders looking to attain?
  • What could potentially affect me?
  • What is considered most important?
  • Is there anything I can do about it?

From there, we are able to discern if we could or could not “do it.”

When it came to using the “travel to the mall” example, the responses to risk identification, assessment and respond constantly changed based on the circumstances – weather, traffic conditions, vehicle condition, etc.

Once we were done with the example, we then talked about the four key responses:

Take, Terminate, Transfer or Treat

The idea was to keep the methodology simple so the audience wouldn’t become confused by the jargon.

We then asked for volunteers for a real-world example. A local restaurant owner was kind enough to our “guinea pig.” We went through a quick risk identification and assessment workshop, writing on post-it notes and putting them on a wall close by.

Every participant was asked to write an uncertainty – no matter how crazy it seemed – on a yellow post-it note and then place it on the wall. We then asked the group to vote on the classification of each uncertainty regarding both likelihood and impact, using a “Low, Medium and High” scoring system.

Next, we had to put them into a 3×3 matrix in order to prioritize the “risks”.

 

 

Although considered a “quick and dirty” method, it’s extremely useful and necessary, especially in the beginning stages of a business. Another benefit behind is that everybody is involved and has “ownership,” as if they are just as important as the next person.

We focused then on the risks that were deemed high impact/likelihood and looked at the different risk response strategies that could be used.

We then pretended we were a financial backer using the same process. We reviewed the results.

The seminar lasted no more than an hour, and every attendee (30+ people) that came for it stayed and listened to what we had to say. Even more surprising, most left their cell phones alone for the entire time.

We took a short break but came back to use the exercise on a retail e-commerce startup. I’d like to think the attendees were convinced that:

“Effective risk management provides one with confidence to take risks.”