When it comes to your business, you want to make sure that you know what risks are coming in the future to help keep your business profitable. The transition from a thought process of “Crisis Management” to “Crisis Prevention” can help to reduce the potential of loss within the fiscal year. There are a few steps to help with this transition, allowing your MI Business Risk Assessment to help you become more profitable.
Step 1: Identify Risks
When presented with a new project, identify as many liability risks of loss as possible. You should be able to detect if a project will take more than the original allotted time to complete. This may lead to penalties as well as additional labor costs.
Step 2: Estimate the Likelihood of Loss
Create a spreadsheet with percentage of loss probability. Determine if each step of the project has a 25, 50 or 75 percent probability of affecting the project profitability.
Step 3: Assign a Dollar Amount
Determine how much the loss would cost the company in the fiscal year. For example if there is a chance that the first stage of the project will run a month late costing $1,000 in penalties and $5,000 in extra labor, there is a risk of a $6,000 loss of profitability towards your company in the fiscal year.
Step 4: Decide is the Company can Withstand the Loss
Decide if in the event of the loss your company can still make a profit. Meaning if you expect that the project will bring $50,000 to your company, the $6,000 loss due to a delay in the first stage mat be manageable. Determine if the risk is worth taking.
Step 5: Minimize Loss Risk
Once you have figured out the potential of loss, figure out a way to minimize or eliminate the loss. Perhaps increasing labor in the beginning of the project will lessen the delay and penalties that you have predicted.
Determining what your liabilities are, understanding the risk of loss and altering the way you manage the project can create a better fiscal year for your business.
At Capital Insurance Group, we know and understand how important it is to minimize the risk of financial loss to your company Call us today for more information on how we can help you. 888.296.0418