In business, there’s always risk. The more a business owner prepares or plans for the risks, the better chance they will have at overcoming it. Knowing how to look out for these risks and the best way to plan for them is a skill organisations tend to welcome.
So, if you have knowledge and expertise regarding risk management, then starting your own consulting business might be the natural next step. Before you take that exciting leap into the world of business, it’s important to understand the legal considerations that will come with it. That way, you can start your risk management consulting business fully prepared and legally secured.
What Is A Risk Management Consultant And What Do Risk Management Consultants Do?
A risk management consultant is a professional that takes a look at the risk a business or organisation might be subject to, then identifies how costly these risks may be and implements the best strategy to minimise the risk.
A risk management consultant might have certain areas they specialise in. As a result, you’ll likely find risk management consultants for various types of issues such as IT, compliance, management, operations and cybersecurity.
How To Become A Risk Management Consultant
To become a risk management consultant, it’s important to have the right qualifications and experience. Generally, risk management consultants have a bachelor’s degree or higher in their area of expertise, along with some years of industry experience.
So, if you’re thinking of starting your own risk management consulting business, it is vital that you have your qualifications sorted and ensure you’ve got enough experience to back you – clients are obviously going to prefer someone that has proven their ability to be a success in risk management.
What Is The Difference Between A Risk Management Consultant And A Safety Consultant?
Even though there’s no official definition for risk management consulting and safety consulting, there’s a key difference that is often seen between the two. Risk management consultants tend to focus on the financial loss associated with certain risks, whereas safety consultants are usually utilised to identify areas that can cause harm to others.
This doesn’t mean risk management consultants can’t look at safety risks, however they might be more inclined towards assessing the financial impact the risk may have. It’s important to keep in mind though, every risk consultant is different.
Therefore, when you’re planning your business’s services, it’s important to map out exactly what your risk management consultancy will be offering and what it won’t be. You will also need to ensure this is clearly communicated to your clients – legal agreements come in handy here (more on that later).
If a safety consulting business sounds more like what you’re looking for, then we’ve also written about How To Start A Safety Consulting Business.
How To Start A Risk Management Consulting Business
You might be eager to start your risk management consulting business and jump in as fast as possible. As great as that is – it’s a wise idea to take the time to create a business plan.
A business plan is essentially a document that has all your research, plans, goals, strategies and more in one place. With a business plan, it’s much easier to better identify what your business’s strengths and weaknesses might be, as everything is laid out in a single, organised document.
From there, you’ll be able to make stronger plans and better decisions for your risk management consulting business’s future, such as what legal structure the business will have.
Registering My Risk Management Consulting Business
Before you start the registration process for your risk management consulting business, you will need to determine the legal structure your business will have. The legal structure will form the foundations for your business, so this isn’t a choice that should be taken lightly.
In Australia, there are three common types of business structures. Each of them have their own drawbacks and benefits, it’s up to you to decide the best one for your business.
Let’s take a closer look at them below.
A sole trader business allows you to be the sole owner of the business. Essentially, there is no legal separation between the business owner and the business, so as the owner of a sole trader business, you will be completely liable for everything that happens within the business.
Setting up as a sole trader is a relatively simple process. You just need to attain an Australian Business Number (ABN) by going online to the Australian Business Register. You’ll be asked to fill out some details about your business and once you’re done, you should receive your ABN in an email. If your sole trader business is going to be using a name other than your personal one, then you will also need to register your Business Name.
When registering as a sole trader, it’s important to assess the convenience of the setup process against the limited legal protection a sole trader business structure provides. If you’re looking to start a serious business endeavour with long-term growth plans for your risk management consultancy, then a sole trader structure is unlikely to be the right option for you.
For partners starting a risk management consulting business together, a similar process to starting a sole trader business applies. All business partners will need to attain their ABN’s before starting the business together and register a business name if required. At this point, it’s also important to ensure the partnership is cemented through a legal document, such as a Partnership Agreement. Partners need to discuss a lot of matters such as management, profits share and what happens when someone wants to exit the partnership. It’s always a good idea to have these things in writing.
In this kind of partnership, all partners will be personally liable for the business. If you’re looking for something with more legal protection, then you can always register a company and become shareholders rather than partners. Let’s discuss this in more detail below.
A company is the legal structure that offers the most legal protection. You can register a company as an individual or with others by becoming shareholders. A company allows you to have limited liability, however the setup process is a little more complex. Companies also have ongoing obligations, such as annual reporting tasks, so you’ll need to be prepared for that as well.
However, the additional responsibility does allow you to have much more legal protection and options for future growth, which is a huge plus – especially if your risk management consulting business is a significant business venture for you. When Registering A Company, it’s a good idea to seek the help of a legal expert. As you will need to comply with ASIC’s regulations and figure out things like Shareholders, directors and company governance, having an expert on your side can really help things along.
To learn more about business legal structures, click here.
Do I Need Any Legal Documents To Start A Risk Management Consulting Business?
Legal documents are one of the most fundamental aspects of starting a business. A strong legal agreement can help communicate important matters to others, limit your business’s liabilities, establish duties, secure rights and overall, provide protection for your business.
Legal agreements are an important investment for you risk management consultancy’s future, here are some that you may consider looking into getting:
Consultancy Agreement: A consultancy agreement is one of the most vital legal documents you will present to your clients. Consultancy agreements cover most things necessary to make the consultant/client relationship work as smoothly as possible. A strong consultancy agreement can clarify the range of services your clients can expect, duties and responsibilities of both parties, payment, confidentiality, termination and much more.
Employment Agreement: If you’re going to be hiring staff, then it’s essential to have an employment agreement with each and every single one. Whether your staff consist of other consultants or administrative staff, it’s important to have an employment agreement that reflects their individual role, what they can expect from you and what you expect from them. Having everything laid out clearly from the beginning allows less room for confusion and misunderstandings, which is always better for the business.
Website Terms and Conditions: Most businesses opt to have a business website. It makes it easier for potential clients to find out about your business, read about who you are, what services you offer and even get in touch with you. However, being online has its disadvantages, which need to be managed with a website T&C’s. This way, you’ll be able to establish better control and limit your liability.
A risk management consulting business is a great way to combine your expert knowledge and entrepreneurial spirit to start a business you really care about. However, it’s of utmost importance to take care of the legal considerations as you go. To summarise what we’ve discussed:
- Starting a risk management consulting business involves understanding legal considerations to be fully prepared and legally secured
- A risk management consultant assesses business risks, identifies their costs and implements strategies to minimise them
- Qualifications and experience, typically a bachelor’s degree and industry experience, are crucial for becoming a successful risk management consultant
- There’s a difference between risk management consultants and safety consultants, with the former focusing on financial impacts of risks
- Before starting the business, creating a detailed business plan is recommended to identify strengths, weaknesses and set future goals
- When registering the business, choose a legal structure (sole trader, partnership, or company) based on your preferences and long-term plans
If you would like a consultation on starting a risk management consulting business, you can reach us at 1800 730 617 or firstname.lastname@example.org for a free, no-obligations chat.
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