Last week, we followed our blog post ‘Big Companies Get It, Why Don’t SMBs?‘ with a related question posed to the LinkedIn community. As we’ve experienced with the professionals on LinkedIn, the response was strong and made for a great discussion. A lot of different explanations and solutions were proposed and we would like to share them with you here.
Respondents recognized that the perceived benefits of risk management for SMBs are low. While Aon’s 2010 Global ERM survey clearly shows the benefits of risk management, the return on investment in risk management for an SMB just isn’t as recognizable as it is for larger organizations. Some like Gerald Pellett of Green Cycle Design Group suggested that, within an SMB, it’s hard to find time to evaluate risks, let alone to do anything to mitigate them. Take into account the limited resources available to SMBs and the traditional risk management solutions available to them, and the return on investment is even harder to see.
Yves Banks of Suzano Pulp and Paper and other respondents felt that it was where the responsibilities of risk management fell that made the difference. While large organizations sometimes employ one individual tasked only with risk management and risk mitigation, their top managers also take responsibility for the risks applicable to their department or division. For SMBs, the owner is often the manager and leader of the organization. That person already wears too many hats within the organization to dedicate time to risk management.
Scale was noted by Dean Cording of Succurro as being an important element of the discussion. Typically, when we’ve thought about scale, we’ve recognized that large organizations have large solutions to risk mitigation and that scaled solutions for SMBs just aren’t available or accessible. However, Dean noted that a risk event can strike a large organization and a mid-sized organization with differing impact. While the risk event may be identical in both organizations, the impact of the event will be far greater for the SMB than it will be for the larger company.
Risks faced by SMBs are manageable and the benefits are worthwhile. Even though traditional risk management may not suit the needs of SMBs, scaled solutions that can help SMBs identify, evaluate and manage their risks are available. We were fortunate enough to have some respondents even suggest ways that SMBs could do a better job of reaping the benefits of risk management. Making use of simple instruments to manage risk is one such recommendation. We like this suggestion that SMB risks are manageable because – well, because we know they are manageable! Being a provider of online risk management solutions for mid-sized organizations, we know there are convenient and beneficial solutions out there that are neither complicated nor expensive. It just takes a good understanding of the organization in question and the understanding that risk management is an on-going process that will need your attention from time to time. When we think about risk we often focus too greatly on risk mitigation to prevent negative events from occurring and we often forget the upside of risk. Knowing where you stand, what risks you face and the management efforts you have in place can help SMBs to identify and evaluate opportunities that can add value and make the organization more profitable.
I recently spoke with TreasuryandRisk.com about how middle market companies are not adopting risk management strategies as quickly or as completely as they should. In a turbulent economic environment we may be less willing to take on costs and efforts that do not immediately contribute to profitability and shareholder value. But it’s important to remember that risk management and preparedness is not just for the big guys, and the competitive advantages that come along with risk management don’t have to just be of benefit to Fortune 500 companies.