- Collaborate with a trusted advisor to understand what risks are present in your market and their potential implications for your business.
- Make informed decisions through the lens of your risk tolerance or appetite.
- Develop a plan for controlling or managing each type of risk in your business.
Make a plan to understand and manage your risk.
The term risk management is one that can be found with increasing frequency these days. It’s not necessarily fodder for lively dinner conversation, but the timing of when you get to enjoy that next expensive meal could very well depend on how well versed you are on the topic of risk.
Put simply, risk management covers identification, analysis, and acceptance of uncertainty in business decisions. Risk management strategies can help you be confident that uncertainty won’t interfere or prevent you from achieving your business goals.
Risks can come from sources such as uncertainty in financial markets, threats from operational failures, legal liabilities, credit risk, accidents, natural causes and disasters, ever-increasing competition, or other unpredictable events.
The important decisions you as a McDonald’s owner must make every single day have far-reaching consequences. Adequately assessing the potential negatives and formulating a plan for that inevitable bump in the road could be the difference between success and failure.
As McDonald’s franchisees, you can use a variety of tactics to deal with risk.
Accept that risk exists
The first step to addressing any problem is to accept that it exists. Pretending you’re immune or that nothing bad could happen to you or your business is quite possibly the most dangerous position you could take.
Collaborate with a trusted advisor to understand what risks are present in your market and their potential implications for your business. Together you can decide whether the consequence(s) of a particular risk is acceptable. It’s easier to make a well-informed decision once you understand the costs in terms of time and money.
Catalog and assess risk
Work with an advisor to formulate a solid understanding of the implications of risks. In the business world, and especially one as incredibly competitive and volatile as the quick-service restaurant industry, what you don’t know can hurt you.
While the assumption of some risk is obviously inherent, making informed decisions through the lens of your risk tolerance or appetite is one of the hallmarks of a good leader and businessperson.
Once your risks have been identified, diligently analyzed, and determined to be unavoidable, work on developing a plan for controlling or managing each type of risk.
- Insurance should always be a major component when developing your plan. Consider the proper level of liability, property and casualty, business interruption, and other types of insurance.
- Develop and implement strong internal controls, both operationally and financially, to mitigate and manage the risk of theft, fraud, and other potential harmful wrongdoing.
Resist the urge to become complacent and assume risk management is on “cruise control.” McDonald’s owner, together with their CPA or trusted advisors, should periodically revisit the basic assumptions and premises of the identified risk(s).
Scan the environment to see whether the situation has changed in a way that affects the nature or impact of your risk. If the risk changed sufficiently, you may find your current plan for management is ineffective and needs to be altered. Or, you may determine that a previously identified risk is no longer a risk and the associated resources can be allocated elsewhere.
How we can help
Our world is filled with risk. The potential for negative outcomes can never truly be mitigated to zero. However, with proper planning and experienced advice, you can manage those unrealized hazards and help keep your business out of harm’s way. CLA can help you identify risks and create a cost-effective control environment so you can concentrate more fully on running your business.