Business risks

Business risks are anything that could have a negative impact on your business.

Many business risks relate to work health and safety. But they can also involve things like:

• natural disasters and emergencies
• economic conditions
• government regulations or policies
• technical problems or cyber security threats
• legal issues
• criminal activity
• negative reviews or media coverage
• staffing issues.

Risk management means identifying, analysing and reducing risks to your business. You can also look for opportunities that might have a positive impact on your business.

The main types of risk are:

• opportunity-based risks
• uncertainty-based risks
• hazard-based risks.

Opportunity-based risks

This type of risk comes from choosing one opportunity over others. By committing your resources to one opportunity, you risk:

•  missing out on a better opportunity
•  getting unexpected results.

Some opportunity-based risks for a business are:

• moving to a different location
• buying a new property
• selling a new product or service.

Uncertainty-based risks

This type of risk comes from unknown or unexpected events. It’s hard to predict these events and the damage they can cause.

Some examples of uncertainty-based risks:

• fire, flood or other natural disasters
• unexpected financial loss due to an economic downturn or a business that owes you money going bankrupt
• losing important suppliers or customers
• your market share decreasing when new competitors or products enter the market
• court actions.

Some things you can do to reduce the impact of uncertain events on your business are:

• develop an emergency management plan to minimise the impacts of an emergency
• keep a supplier database to manage your stock and equipment
• get regular feedback to check if your customers are satisfied
• do market research to identify new trends and changes to customer expectations
• check your business’s financial health and get expert advice on improving your business.

Hazard-based risks

These types of risks come from dangerous situations in the workplace.

Some examples are:

• physical hazards from high noise levels, extreme weather or other environmental factors
• equipment hazards from faulty equipment or poor processes
• chemical hazards from improper storage or using flammable, poisonous, toxic or carcinogenic chemicals
• biological hazards from viruses, bacteria, fungi or pests
• ergonomic hazards from poor workplace design, layout or equipment use
• psychological hazards from bullying and harassment, discrimination, heavy workloads or a mismatch of employee skills and job duties.

Managing risks helps reduce the impact that unexpected events have your business.

It can also help you:

• improve your relationships with customers, suppliers, employees and the community by understanding their expectations
• improve staff morale by making them feel safe at work
• keep your business open during natural or economic disasters
• reduce your compliance and insurance costs due to a lower risk of damages.

Risks you must manage

You're required by law to manage some risks. For example, you must manage or reduce the risk of:

• accidents and injury by following work health and safety (WHS) laws and having workers' compensation insurance
• customer complaints by treating customers fairly under Australian Consumer Law
• damaging the environment by complying with environmental laws.

Creating a risk management plan will help you assess and manage risk in your business.

The main steps are:

1. Identify – work out what risks your business could face.
2. Analyse – assess the level of each risk and which ones are most urgent.
3. Evaluate – compare the risks against set criteria to decide which ones need to be treated.
4. Treat – develop and implement strategies to treat risks.

It’s important to include your staff and other stakeholders in this process. They can help you identify your biggest risks and solutions to treat them.

You probably won't have enough information or resources to manage every risk. But a good risk management plan lets you change your approach if it isn't working or something unexpected happens.

Some state governments have resources about risk management:

• Queensland
• Victoria.