Risk Management & Contingency Planning

Identify, assess, and mitigate business risks

Common Business Risks

💰

Financial Risks

  • Cash flow shortage
  • Unable to secure funding
  • Cost overruns
  • Bad debt from customers
📊

Market Risks

  • Lower than expected demand
  • Market saturation
  • Changing preferences
  • Economic recession
⚙️

Operational Risks

  • Supply chain disruptions
  • Equipment failure
  • Quality control issues
  • Key employee departure
⚖️

Legal/Regulatory

  • Lawsuits
  • Compliance violations
  • Regulatory changes
  • IP disputes
🏆

Competitive Risks

  • New competitors
  • Price wars
  • Competitive innovation
  • Loss of advantage
💻

Technology Risks

  • Cybersecurity breaches
  • System failures
  • Technology obsolescence
  • Data loss

Risk Assessment Matrix

Score each risk on two dimensions:

Probability: 1 (Very Unlikely) to 5 (Very Likely)

Impact: 1 (Minimal) to 5 (Catastrophic)

Risk Score = Probability × Impact

Risk Score Priority Action Required
1-5 Low Monitor
6-12 Medium Plan mitigation
13-25 High Immediate action needed

Risk Mitigation Strategies

1. Avoid the Risk

Change plans to eliminate the risk entirely

Example: Don't enter a highly regulated market if compliance is too complex

2. Reduce the Risk

Take actions to lower probability or impact

Example: Diversify suppliers to reduce supply chain risk

3. Transfer the Risk

Shift risk to another party through insurance or contracts

Example: Purchase liability insurance, use warranties

4. Accept the Risk

Acknowledge the risk and prepare a response plan

Example: Have cash reserves for economic downturns

Contingency Planning Template

For Each High-Risk Scenario:

SCENARIO: [What could go wrong?]

TRIGGER: [What signals this is happening?]

IMPACT: [How would this affect the business?]

CONTINGENCY ACTIONS:

  1. Action step 1
  2. Action step 2
  3. Action step 3

RESPONSIBLE PARTY: [Who executes the plan?]

RESOURCES NEEDED: [What's required?]