The small-scale business landscape in Australia is thriving. The value of small businesses to the Australian economy surged by 15% during 2021-22, contributing to one-third of the country’s GDP—valued at $506 billion.

With its growth also comes a fair set of challenges that small businesses need to navigate to ensure continued growth and success. Some of the most common challenges faced by small businesses in Australia are workforce shortages, rising inflation, energy prices, and economic uncertainty.

In these tumultuous economic conditions, small businesses must take every step possible to establish, streamline, and future-proof their operations. In this context, risk management for small businesses presents tangible and valuable opportunities to achieve these exact goals.

Here is how you, as a small business owner in Australia, can improve your risk management capabilities to future-proof operations and secure a sustained competitive advantage.

Common risks faced by small businesses in Australia and their solutions

While business risks can sometimes be hard to predict, understanding the common risks that Australian small businesses face will prepare you better to identify and manage them effectively.

Here are some of the more common risks faced by small businesses in Australia and how they can be addressed through proven risk management strategies.

High dependence on a small supplier base

Small businesses often tend to have a limited number of major suppliers, meaning they are highly reliant on a small number of suppliers. So if any supply chain disruptions occur and the operations of these suppliers are affected, the business too will suffer as a result.

Small businesses can counteract these threats by diversifying their supplier base, negotiating contracts with supplier performance in mind, and maintaining good relationships with suppliers to foster closer collaboration and innovation.

High dependence on a small supplier base

Small businesses often tend to have a limited number of major suppliers, meaning they are highly reliant on a small number of suppliers. So if any supply chain disruptions occur and the operations of these suppliers are affected, the business too will suffer as a result.

Small businesses can counteract these threats by diversifying their supplier base, negotiating contracts with supplier performance in mind, and maintaining good relationships with suppliers to foster closer collaboration and innovation.

High staff turnover

Losing key employees is a costly issue, especially for small businesses. Recruitment and training costs paired with the loss of productivity can lead to massive losses for small businesses, alongside the loss of internal knowledge and expertise.

Small businesses can counteract these threats by striving to establish a positive work environment that encourages employee engagement and loyalty. Offering competitive salaries and benefits, and providing opportunities for professional development are also important.

High staff turnover

Losing key employees is a costly issue, especially for small businesses. Recruitment and training costs paired with the loss of productivity can lead to massive losses for small businesses, alongside the loss of internal knowledge and expertise.

Small businesses can counteract these threats by striving to establish a positive work environment that encourages employee engagement and loyalty. Offering competitive salaries and benefits, and providing opportunities for professional development are also important.

risk management in local government

Losses from unmanaged risks

The risk landscape for small businesses is vast. Possible risks can range from cyber attacks and theft to natural disasters and regulatory changes. Not having appropriate risk mitigation measures for each eventuality can be fatal to business development and survivability.

Small businesses can counteract these threats by establishing a risk management plan that details all possible risks as well as relevant mitigation procedures. A strong risk management framework is a necessity to avoid losses from unmanaged risks.

risk management in local government

Losses from unmanaged risks

The risk landscape for small businesses is vast. Possible risks can range from cyber attacks and theft to natural disasters and regulatory changes. Not having appropriate risk mitigation measures for each eventuality can be fatal to business development and survivability.

Small businesses can counteract these threats by establishing a risk management plan that details all possible risks as well as relevant mitigation procedures. A strong risk management framework is a necessity to avoid losses from unmanaged risks.

Compliance issues

Businesses are subject to a range of local, national, and even international regulations where applicable. Forgoing compliance requirements can result in penalties and fees, legal trouble, damages, and loss of productivity.

Small businesses can counteract these threats by incorporating compliance processes into the risk management framework while also maintaining accurate records to demonstrate compliance. In addition, investing in insurance coverage to protect against liabilities is advised.

Protect Duty Legislation
Protect Duty Legislation

Compliance issues

Businesses are subject to a range of local, national, and even international regulations where applicable. Forgoing compliance requirements can result in penalties and fees, legal trouble, damages, and loss of productivity.

Small businesses can counteract these threats by incorporating compliance processes into the risk management framework while also maintaining accurate records to demonstrate compliance. In addition, investing in insurance coverage to protect against liabilities is advised.

Cash or stock losses

Cash or stock losses can happen due to theft, fraud, or other forms of financial mismanagement. These losses can result in operational disruptions, reductions in profitability, and lapses in trust with internal and external stakeholders.

Small businesses can counteract these threats by implementing internal controls like regular audits and segregation of duties to minimise the likelihood of financial mismanagement. Investing in insurance that protects against losses from theft or fraud is also effective.

Cash or stock losses

Cash or stock losses can happen due to theft, fraud, or other forms of financial mismanagement. These losses can result in operational disruptions, reductions in profitability, and lapses in trust with internal and external stakeholders.

Small businesses can counteract these threats by implementing internal controls like regular audits and segregation of duties to minimise the likelihood of financial mismanagement. Investing in insurance that protects against losses from theft or fraud is also effective.

Business downtime

Any disruptions in business operations can lead to the loss of productivity and revenue. These disruptions can occur due to any number of reasons, from equipment failure and power outages to other unforeseen events.

Small businesses can counteract these threats by developing incident response plans and implementing contingency measures like backup power sources and redundant equipment. Insurance that covers business interruptions or loss of profit could also be a worthwhile investment.

Business downtime

Any disruptions in business operations can lead to the loss of productivity and revenue. These disruptions can occur due to any number of reasons, from equipment failure and power outages to other unforeseen events.

Small businesses can counteract these threats by developing incident response plans and implementing contingency measures like backup power sources and redundant equipment. Insurance that covers business interruptions or loss of profit could also be a worthwhile investment.

Best practices in risk management for small businesses

Small business owners should also keep the following in mind when implementing risk management measures in their businesses to ensure the best possible results.

Develop a risk management plan

A comprehensive risk management plan that details the possible threat scenarios, response plans, and guidelines on damage mitigation is essential for building preparedness.

Maintain accurate records

Accurately keeping records can help protect your business from potential legal liabilities and help you identify potential risks in advance and develop management strategies.

Implement internal controls

Internal controls such as policies, procedures, and technical safeguards are critical for maintaining an effective risk management programme while also ensuring compliance.

Foster a risk-aware culture

Risk management is highly effective when the entire organisation engages and contributes toward the initiative. Encouraging employees to take part in managing risks is ideal.

Stay up-to-date with regulations

Staying up-to-date with the latest regulations and compliance requirements can ensure that operations remain compliant to minimise the risk of legal and compliance-related risks.

Continuously monitor risks

Risk management is a constant process. Continuously monitoring and evaluating the risk landscape and adjusting your risk management plan is a necessity for achieving success.

Take the risk management capabilities of your small business up a notch with SECTARA

SECTARA’s security software eases the process of risk management for small businesses with precise and easy-to-use solutions that immediately deliver value.

Our pricing structure is small business-friendly, with multiple pricing options and a 14-day free trial to get you started.

Sign up for the free trial by clicking the button below. No credit cards or other commitments are necessary.

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Some of the industries we serve

Government

Identify, monitor, and manage systemic risks associated with policy implementation, public safety, and national security with a scalable and configurable risk assessment solution.

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Critical infrastructure

Obtain insights to identify and mitigate potential threats to critical infrastructure like energy, transportation, and communication systems through professional risk assessments.

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Mining

Ensure safe, secure, and efficient operations and overcome common mining challenges like equipment failure and environmental hazards via a professional risk assessment solution.

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Defence

Obtain a comprehensive view of potential threats to national and regional security and implement effective risk management strategies with military-grade risk assessment solutions.

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Healthcare

Ensuring the safety of patients, staff, and other stakeholders while managing risks associated with medical procedures and data privacy through a configurable risk assessment solution.

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Finance

Identify, monitor, and manage critical risks like market volatility and data breaches with a risk assessment solution to protect stakeholder assets and ensure regulatory compliance.

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Consultancy

Help your clients make informed decisions about risk management by leveraging insights from a professional risk assessment solution that helps identify, address, and monitor risks.

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Cybersecurity

Protect your digital assets with our advanced cybersecurity risk assessment solutions. Stay ahead of evolving threats and fortify your defences with comprehensive risk assessments.

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Education

Identify and mitigate compliance, finance, operational, and reputational risks in processes such as student selection and regulatory adherence with professional risk assessments.

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What you get with our free trial

2 users (Account Admin, Org & BU Admin, Assessor, Viewer)

2 concurrent assessments

2 organisations & business units

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The ability to export assessments to MS Word

MS Excel treatment plans

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White-label exported documents

Audit records

Experience the capabilities of SECTARATM first-hand. Sign up for our 14-day free trial today.

What you get with our free trial

2 users (Account Admin, Org & BU Admin, Assessor, Viewer)

2 concurrent assessments

2 organisations & business units

In product training

The ability to export assessments to MS Word

MS Excel treatment plans

White label SECTARATM platform

White-label exported documents

Audit records

Start your 14-day free trial

Please complete all fields.

.sectara.com

Frequently Asked Questions

What is risk management in small businesses?

Managing risks in small businesses refers to the process of identifying, assessing, and prioritising risks associated with small businesses and implementing measures to avoid, mitigate, or transfer said risks.

How can risk management be used in small companies?

Risk management can be used in small companies to identify the risks they are facing and implement strategies to manage these risks. This allows small companies to ensure continuous operations, better profitability, and sustained growth.

How to do a risk assessment for a small business?

To conduct a risk assessment in your small business, follow these steps;

  • Identify potential risks
  • Assess their likelihood and impact
  • Prioritise critical risks
  • Implement mitigation strategies
  • Continuously evaluate and improve the strategies