How bad can it get?
If the pandemic taught us anything, it said the better we understand our business, the easier to identify, understand and assess risks.
The 2020 Risk Management Survey by the Governance Institute of Australia found 60% of small business owners thought potential damage to brand and reputation is their most immediate and serious risk. While that’s a great stat to weave into a client conversation, it’s also important not to overlook other potential risks capable of bringing down any small business (including a creative business).
And what’s the next step after you find the risks?
Our research found four main strategies:
- you can take action in an attempt to avoid the risk completely
- you can take action to reduce the risk
- you can transfer the risk to another person or business or
- you can accept the risk as part of managing a business.
We’ve taken two of these strategies — avoid and reduce — and researched how they might work in the five potential risks to a creative business.
- risk to your reputation
- risk of unplanned growth
- risk to you or your employee’s health
- risk of financial insolvency
- risk to your intellectual property
- risk due to failure to innovate.
Risk to your reputation
This is the stuff of nightmares: watching your business, built with sweat and toil to reflect your ethics and morals, crumble before your eyes. The risk can come from internal sources (like unhappy employees) or external sources (like disgruntled clients or suppliers).
Either way, with reputation, proactivity is key. Much of this can be solved by managing the expectations of the people you work with both inside and outside the studio.
How do you do that? By developing systems, processes and documentation.
Risk on unplanned growth
Growth is good.
Planned growth is great.
But too much growth, too soon, can turn ugly. It doesn’t take long for a positive to turn negative.
Too much work is the kind of problem every business owner would like to face. Problem is, rapid growth can capsize a business just as quickly as too little growth. Especially when the growth happens on shaky foundations. Rapid growth will quickly identify any cracks in procedures, processes and leadership.
Risk to your employees’ health
A creative business is a ‘people’ business. The only difference between one business and another is the unique team and their set of skills. So it’s a no-brainer to protect, and nuture your team.
Risk to your financial solvency
The risk to financial solvency can come from within a studio through mismanagement, or externally from incompetent suppliers or bad clients.
Risk of financial insolvency can come from:
- being uninsured or paying for the wrong type of insurance (it’s complicated)
- a mismanaged project. The possibilities are endless, like insufficient planning; or scope creep; or budgetary issues or scheduling/timeline issues; or a relationship breakdown with a client; or even from just not having the right talent available at the right time.
- mismanaged finances, like cashflow issues or a bad debt
- bad clients – those who take the work but refuse to pay.
Risk to your intellectual property
The risk of ambiguity in copyright ownership and copyright infringement is a constant for all creatives. It is so valuable to know and understand the risk because proactive and prevention is key.
Risk due to failure to innovate
Traditionally, many people developed a business around a set of core skills and stuck to it, year in and year out. While technology disruptions shook that business model, COVID broke it.
More than ever, businesses need to continually disrupt to remain sustainable. We learnt ‘business as usual’ is no longer an option.
It’s not all doom and gloom – and it’s not about jumping at shadows – it’s about understanding and assessing each risk and then identifying whether it/they are relevant to your business and your situation.
If they are relevant, the next step is a strategy to avoid/reduce/transfer or accept. That can be done using inhouse skills or by accessing external resources (like insurance or legal practitioners).
We’ve documented all these options in an ebook titled: How bad can it get? Risk Management for creative businesses. Our aim is to package relevant information so creative business owners can make informed decisions. Above all, our research shows forewarned is forearmed.
Link to more information about the ebook here.
Want more information like this delivered to your inbox every Wednesday? The Design Business Review is Australia’s only online design management magazine. It’s professional development information written specifically for Australian designers by Australian designers. Best of all, it’s free.
These articles talk more about working in the creative industry:
- Postmortems – something I first heard about from our friends at Portable
- Using knowledge from the health industry to learn more about project management
- I’m talking to recruiters across Australia to build knowledge about ‘what’s a fair wage?’
About Carol Mackay
After 30+ years running a graphic design firm, Carol pivoted from client-focused projects to consult to the design industry.
Carol’s special power has always been an ability to use design to translate difficult to understand or complex messages. She believes design brings clarity to complex issues. From clarity comes understanding, and understanding leads to knowledge.
As a designer she used those skills with clients like The Magistrates, County and Supreme Courts; Ombudsman schemes and Emergency Service agencies. At DBC she uses the same skills to help designers de-mystify the complexities of managing a small business.
Outside of DBC Carol mentors graduates and is an active volunteer at Never Not Creative, a community of creatives pushing for change in the creative industry.