I am passionate about risk profiling and managing risk in your business so this was important for me to share! Understanding risk factors within your business practice is essential to running a profit-seeking entity. For the Portfolio solopreneur this can be crucial since you are juggling multiple streams of income.
When I was an active Independent Financial Advisor, one of the main interview sections was Client Attitude to Risk. My recommendation letters would need to circle back to why I chose the recommendation and how aligned my advice was with the client’s attitude to risk, as assessed (and evidenced) during our meetings. For example, you would not put 100% of someone’s investment into volatile stocks and shares if they are risk-adverse and retired.
Being aware of your own attitude to risk in your business as well as in your personal life is extremely useful and can make all the difference in your decision-making process. Interestingly, when I worked as a Financial Analyst, one of my key observations was how different attitudes to risk impact that individual’s financial projections. The Sales Director had a very high capacity for risk so was often over-inflating his sales targets where, in contrast, one of our Project Delivery Directors was very conservative. When working for a company responding to share holders, volatility is measured internally by how accurate your projections are so either of those scenarios is not ideal. I’d have to meet and discuss the assumptions and then adjust accordingly; the goal is to be accurate. Accuracy instils confidence that you are in control.
As such, in a solopreneur’s world, we can repurpose the concept of risk and design a risk matrix that suits us. My risk matrix is a hybrid assessment of traditional risk, such as financial, operational, legislative, and systemic along with a business health check. Using an innovative approach on more traditional, corporate tools enables creatives and less conventional minds to take advantage of and adapt the tools to suit them. Layering these tools on top of each other means you’ll have full view of your business, where it’s going and what it is capable of providing you, whilst factoring in risk elements. It should be a vital part of each business dashboard.
Here are 5 benefits in favour of completing and maintaining a risk matrix:
- You review your processes and systems tightening automation and plugging leaky and faulty ones.
- You have to work on your business and review your business tools – proactively managing financial risk of cost erosion.
- You have to look at your contracts and terms and conditions, clarifying areas where litigation might arise
- You review your portfolio identifying a service or business that no longer serves you or is worth your effort
- It forces you to consider your client journey and assess where you might have surprises pop up, putting you in better control
The comfort of knowing you’ve thought of most, if not all potential hazards affecting each business is definitely a CEO habit worth adopting and can transform a business that is operating as a hobby into a prosperous, profit-seeking entity enabling you to live on your own terms.
To create a risk matrix, start with you and what risks are unique to you. Look at your life and your choices, how risky or on the edge do you live? Is it useful and does it pay off? Think of risk as a source of energy and if it were a person, what would your risk-person be like? Get to know if your risk person is helpful or a hindrance?
Next, you are the driving force in your business so you have to be well in order to do well. Therefore, I suggest you use the Wheel of Life model or Life Playbook components to assess how you are doing personally; what risks would constitute a potential business risk? For example, I have 2 boisterous children who do not give a rat’s ass about my work. Scheduling an important meeting when they are nearby is business-suicide. Also, I have seasons and time blocks where I am at my most creative so utilising them to the best advantage is conducive to a super productive day or period of time. I’m cranky when I’m tired so scheduling a coaching call at 9PM to accommodate a North American client is counter-productive. Also, I must have a certain amount of time to meditate and/or exercise. You get the idea.
Then, you look at your actual business and determine any risks. For example, booking a workshop venue that hasn’t been physically seen, you have 2 obvious risks – location is not suitable to your standards and potentially another Coronavirus style lockdown ensues. I suggest mind mapping or brain dumping any and all potential occurrences that would impact your business and you can then organise into subsections or matrix. Work it out for how you want to manage it since this tool will be yours.
Imagine the worst happening, how would you fix it. Studies have shown that when we “practice” a worst case event occurring, even in our minds, when it happens, your brain doesn’t freeze – it initiates that protocol actions that you’ve practiced. Gold dust right there – that’s preparing for impact in action!
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