There are many obstacles that can come between you and success in the brewing industry. Competition, quality control, marketing, distribution and municipal / provincial / federal laws may all have an effect on whether your business grows. Therefore, you should develop a risk management plan which includes risk analysis.
What is Risk?
Risk can be defined as anything that may adversely affect a business' ability to achieve its goals and objectives. The key to understanding risk management is to simplify the process.
How to Perform Risk Analysis
Step 1
The first step is to identify all potential issues as they relate to your business. This list needs to be comprehensive and include every possible risk imaginable, including weather, financial, socio-economic and human resources concerns.
Step 2
The next step is to perform an analysis of each risk. In order to do this properly, you need to assess each risk for frequency (how often it will occur) and severity (how significant the damage could be). For example, an extremely cold stretch of weather could have a large impact on the sales of beer, causing your revenue to decline and ultimately impacting almost everything else you do.
Another risk could be your accounts receivables. If your A/R grows and is difficult to collect, it will affect your cash flow and could create operational challenges.
What if another micro-brewery opens up just around the corner from you? This increase in competition could decrease your walk-in traffic, distribution targets and overall sales.
Benefits of Risk Analysis
Analyzing risk will allow you to create policies and procedures that will minimize the effects of these issues by:
- avoiding the activity that could contribute to the loss
- reducing the number of times this event occurs
- reducing the impact of the event
Keep in mind that you cannot totally avoid risk, but you can manage it.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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