May 20, 2024 / News

Business Advisory / Business Risks / Cyber Security

Ensuring a proactive approach to business and cyber risks

Running a small business in today's technological landscape can be challenging. Our businesses are more interconnected and reliant on technology than ever before. While this increased use of technology brings many benefits, it also exposes us to various cyber threats that could lead to data breaches, financial losses, and damage to our reputation.

To minimise potential challenges, it’s important to take a proactive approach, develop a plan, and identify any possible risks.

What are classified as risks to your business?

Many small business owners struggle to identify and minimise risks because there are simply too many potential risks to keep track of. Risks can arise in all areas of your business, including –

•  Business processes and systems

•  Clients/customer agreements and contracts

•  Facilities (factory/office layouts)

•  Personnel issues

•  Cash flow

•  Products and services

•  IT systems

•  Change initiatives

A variety of risks need to be carefully managed throughout most small and medium-sized enterprises (SMEs).

One significant risk that is becoming more prevalent these days is cyber risk. Recent examples of cyber risk include the lingering effects of major data breaches like the Medibank incident and failure to use two-factor authentication. Failing to use safety measures like two-factor authentication can leave businesses vulnerable to cyberattacks.

As digital capabilities continue to advance, cybercriminals have become increasingly sophisticated in targeting vulnerable businesses. They can often identify weak links within a company, especially through the human element.

Utilising frameworks

As a part of managing these risks, small business owners can use various risk frameworks. One useful framework is PESTLE analysis, which stands for –

•  Political

•  Economic

•  Social

•  Technological

•  Legal

•  Environmental factors

This broad analysis helps us anticipate external factors that could impact our operations and strategies, such as legislation changes, economic policies, social media trends, consumer attitudes, and technological advancements.

For example, a change in consumer attitudes toward sustainability (social factor) might prompt us to develop eco-friendly products or adopt greener practices, or a new regulation (legal factor) could require us to update our data privacy policies or make changes to our operations.

The PESTLE analysis encourages you to think broadly about your business environment and stay ahead of the curve. It helps you identify emerging risks and adapt strategies to ensure your business remains resilient and competitive in macro-environmental shifts.

Another helpful framework is Failure Mode and Effects Analysis (FMEA), a step-by-step approach for identifying all possible failures in designs, processes, products, or services. FMEA helps evaluate the potential impact of failures and how likely they are to occur so you can prioritise which risks to address first. For example, it can help identify risks like cyber-attacks, software compliance issues, and insufficient controls for remote workers.

Some examples where FMEA could be useful –

•  Evaluating cybersecurity risks and impacts of data breaches

•  Reviewing quality control on manufacturing processes

•  Assessing safety hazards for a new product design

•  Analysing potential disruptions in a supply chain process

By systematically working through failure modes and effects, businesses can develop robust risk management plans to prevent issues, reduce downtime, and ensure business continuity.

Next steps

For business owners, managing risks is key to long-term success. It's not just about safeguarding against potential threats but also about ensuring the longevity and resilience of your business in an ever-changing, competitive environment. By using frameworks like PESTLE and FMEA, you can understand your risk landscape and take proactive steps to mitigate and minimise those risks.

Being proactive and establishing a comprehensive risk management strategy is key. Contact your local Nexia Edwards Marshall Advisor today. They can help you work through the right risk frameworks so you can get back to confidently navigating your business’ growth.

The material contained in this publication is for general information purposes only and does not constitute professional advice or recommendation from Nexia Edwards Marshall. Regarding any situation or circumstance, specific professional advice should be sought on any particular matter by contacting your Nexia Edwards Marshall Adviser.