For the entrepreneur and small business owner, nothing can be more helpful to your business than cost-benefits analysis, especially as it relates to risk management. Basically, what your cost-benefits analysis will do for you will be to give a monetary value to everything. Every potential cost, every potential benefit, will be assigned a monetary value. In this way, you and your risk management advisor will be able to determine if a certain action your company may take is truly worth it.
There are many areas in which a small business owner and entrepreneur can expand a cost-benefits analysis aside from risk management. Perhaps the first, and foremost, is the financial arena. That is, perhaps, obvious to the business owner and entrepreneur. Nothing is more important than your financials. It’s everything, actually. Everything else in your business, including your risk, exists to support your financial condition.
By contributing a financial and monetary value on things, it allows you to truly understand what activities and pursuits will actually be profitable to you. You just don’t have time to waste so any tool that will allow you to objectively see the totality of a project, as well as the risk, will serve you well in the long run.
Placing a dollar value to everything can save time, too. By seeing what your costs will be, you can immediately decide if the benefits the project will outweigh the actual costs of doing it. Sometimes, it might not appear as if you can actually see a numerical cost to something. For instance, if you are planning a project that you hope will boost company morale you may not see a cost-benefit analysis here. But, consider what it benefits it may have with regard to less turnover, fewer sick days taken, more focused attitudes, greater productivity. Sometimes these intangibles will outweigh the costs.
In the long run, any cost-benefits analysis you may do related to your risk management is worth the time you put into it. Try not to project too far out into the future because, as you know, change happens every moment and it is almost impossible to predict six months form now never mind three years.
Working with your risk management advisor in this area will allow you to get a handle on the process so that such projects become an automatic part of your business operation.
