Five Major Threats to the CEO Optometrist and How to Protect Against Them.

As many independent practice owners understand, owning your own practice offers many rewards, but with these rewards come certain risks. To protect your practice from the exposures it faces, it’s crucial to identify these threats and develop a risk management plan.

Risk is defined as the probability of an event and its consequences. Risk management is the practice of using experts, processes, methods and tools for managing these risks.

Risk management focuses on identifying what could go wrong, evaluating which risks should be dealt with and implementing strategies to deal with those risks. Practices that have identified the risks will be better prepared and have a more cost-effective way of dealing with them.

This series is based on an article found on infoentrepreneurs.org.  It sets out how to identify the risks you and your practice may face. It also looks at how to implement an effective risk management policy and program which can increase your practice’s chances of success and reduce the possibility of failure. Most of the content is from the original article however some of the content was adjusted to make the information more specific to Optometry.

 

According to infoentrepreneurs.org, here are some of the threats your practice as a business will face:

 

The main categories of threats are:

  • Strategic, for example a competitor coming on to the market, like online eye exam

  • Compliance, for example the introduction of new health care legislation, like MACRA/MIPS

  • Financial, for example losing an insurance contract that generated a great percent of your income

  • Operational, for example the breakdown or theft of key equipment, like your server

  • Professional, for example losing your license to practice or good reputation

 

These categories are not rigid and some parts of your practice may fall into more than one category. The risks attached to patient health information protection, for example, could be considered when reviewing your operation or your business’ compliance.

 

Other risks include:

  • environmental risks, including natural disasters
  • employee risk management, such as maintaining sufficient staff numbers and cover, employee safety and up-to-date skills

 

Risk management helps you to identify and address the risks facing your practice and in doing so increase the likelihood of successfully achieving your objectives.

 

A risk management process involves:

 

  • methodically identifying the risks surrounding your practice activities
  • assessing the likelihood of an event occurring
  • understanding how to respond to these events
  • putting systems in place to deal with the consequences
  • monitoring the effectiveness of your risk management approaches and controls

 

As a result, the process of risk management:

  • Improves decision-making, planning and prioritizing.
  • Helps you allocate capital and resources more efficiently.
  • Allows you to anticipate what may go wrong, minimizing the amount of “firefighting” you have to do or, in a worst-case scenario, preventing a disaster or serious financial loss.
  • Significantly improves the probability that you will deliver your business plan on time and to budget.

 

Risk management becomes even more important if you decide to try something new in your practice, for example launching a new specialty or product. Competitors following you into these specialties or breakthroughs in technology which make your product redundant, are two risks you may want to consider in cases such as these.

 

How to evaluate risks

 

Risk evaluation allows you to determine the significance of risks to the practice and decide to accept the specific risk or take action to prevent or minimise it.

To evaluate risks, it is worthwhile ranking these risks once you have identified them.

This can be done by considering the consequence and probability of each risk. Many businesses find that assessing consequence and probability as high, medium or low is adequate for their needs. These can then be compared to your business plan – to determine which risks may affect your objectives – and evaluated in the light of legal requirements, costs and shareholder concerns.

There are some tools you can use to help evaluate risks. You can plot on a risk map the significance and likelihood of the risk occurring. Each risk is rated on a scale of one to ten. If a risk is rated ten this means it is of major importance to the practice. One is the least significant. The map allows you to visualise risks in relation to each other, gauge their extent and plan what type of controls should be implemented to mitigate the risks.

Prioritizing risks, however you do this, allows you to direct time and money toward the most important risks. You can put systems and controls in place to deal with the consequences of an event. This could involve defining a decision process and escalation procedures that your practice would follow if an event occurred.

Over the next few week, we’re going to explore those five risks that are major threats to your practice and how you can prepare for them.  In your opinion, which of the following do you think poses the highest threat to the success of your practice?  Write your answers in the comment section below.

  • Strategic, for example a competitor coming on to the market

  • Compliance, for example the introduction of new health care legislation

  • Financial, for example losing an insurance contract that generated a great percent of your income

  • Operational, for example the breakdown or theft of key equipment like your server

  • Professional, for example losing your license or good reputation

 

Until next time, remember to continue to Dream Bid, Take Risks and become the CEO of YOU! ™

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