Risk Management - TARA framework

Risk Management - TARA framework

A major cause of business failure is the lack of correctly identifying and controlling risks.

📉 Business risk is the threat to your business that can affect achieving your desired results.

Managing risk will help you confidently act on future business decisions, and it will increase your chances of success.

🕵️ Risk management is the process of identifying in advance what is threatening your business and how you should respond.

Risk response is about developing and implementing specific actions to reduce the threats identified to your business.

📝 There are four types of risk responses (TARA)

T - Transfer
A - Avoid
R - Reduce
A - Accept

Maria owns a sales consulting business offering sales training services. She works with clients on a contract basis.

👂 Maria recently heard about risk management and identified a few business risks that she could face.

Maria decided to apply the TARA framework to make sure the risks identified will not affect her business's success.

❌ She is aware that doing business can sometimes involve dealing with lawsuits from clients.

This has a low probability of happening but can significantly affect her business.

✅ She decides to transfer this risk by purchasing indemnity insurance.

Note: professional Indemnity insurance can often be a legal requirement.

If a client believes that the business was damaged because of your negligence, it can raise a lawsuit.

Professional indemnity insurance will cover the legal costs and damages caused.

🙋 Few clients asked Maria if she could help with the website development and search engine optimisation.

Maria doesn't have such skills but wants to expand her business by diversifying her services.

Hiring a market specialist would decrease the company's cash flow as they are not enough demand for such services.

✅ She decides to avoid this risk and outsources this service temporarily to an external party and keeping the cash flow stable. 

Maria is aware that data breaches to a business are very risky.

She wants to reduce this risk and ensure that the antivirus software is up to date and that all the laptops are backed up daily.

❌ Maria is aware that achieving 100% customer satisfaction is not possible.

She noticed that one of every 8 customers, on average, will think that her sales training is not good.

👌 Maria doesn't want to stress and accepts this inevitable risk.

This risk has a low probability and a low impact on her business.