Businesses need to manage and reduce business risks and disruptions that can bring business to a grinding halt. Risk is an inevitable part of starting and growing a business. It’s impossible to control everything. Whereas there are plenty of ways to limit internal and external threats to your business and its growth.
Identifying Business Risk
There is no substitute for running a business professionally and not run into any risks, but however careful you are, bad things happen. There are many different types of business risks. Risks can be internal and external to your business. They can also directly or indirectly affect your business’s ability to operate. Risks can be hazard-based (e.g. chemical spills), uncertainty-based (e.g. natural disasters) or associated with opportunities (e.g. taking them up or ignoring them).
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To get the most out of a risk assessment plan, you should include a schedule for testing and updating it. Especially making sure you take into account any changes to your business, your industry, or the location you operate in.
Avoid The Risk
If it’s possible, you may decide not to proceed with an activity that is likely to generate risk. Alternatively, you may think of another way to reach the same outcome that doesn’t involve the same risks. This could involve changing your processes, equipment or materials.
Reduce The Risk
You can reduce a risk by,
- Reducing the likelihood of the risk happening. For example, through quality control processes, auditing, compliance with legislation, staff training, regular maintenance or a change in procedures
- Reducing the impact if the risk occurs. For example, through emergency procedures, off-site data backup, minimizing exposure to sources of risk, or using public relations.
Transfer The Risk
You may be able to shift some or all of the responsibility for the risk to another party through insurance, outsourcing, joint ventures or partnerships. You may also be able to transfer risk by:
- Cross-training staff so that more than one person knows how to do a certain task and you don’t risk losing essential skills or knowledge if something happens to one of your staff members
- Identifying alternative suppliers in case your usual supplier is unable to deliver
- Keeping old equipment (after it is replaced) and practicing doing things manually in case your computer networks or other equipment can’t be used.
Accept The Risk
You may accept a risk if it can’t be avoided, reduced or transferred. Likewise other risks may be extremely unlikely and therefore too impractical or expensive to treat. However, you will need to develop an incident response plan and a recovery plan to help you deal with the consequences of the risk if it occurs.
Insure your Business
One important resource to help you reduce the business risk is your business insurance provider. Businesses should be prepared by seeking insurance products that help them recover, including those that cover the cost of remediation and lawsuits.
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As businesses grow, they may add space or equipment, create new products or services, or increase their operating and distribution footprint; Without a doubt it is advised that, periodically reviewing your policy to ensure you have the right coverage. It’s easy to forget to insure your business amid rapid expansion. Similarly, you don’t want to find out that you’ve outgrown your coverage just when you need it the most.
Fear of Failure
Everyone experiences fear! some more than others. It’s crucial, though, to face fear head-on. Fear can be so crippling that it holds people back in ways they don’t even realize. Whether it be fear of speaking up in meetings, so the employee is seen as someone who doesn’t contribute much value; or fear of being yourself, instead. Trying to emulate a boss and never learning to really own what is unique and special about you.
Nevertheless, your fear of failing shouldn’t stand in your way of trying something new. A project may not turn out as planned, and you may make mistakes. As long as you learn from those experiences, you haven’t truly failed.
Conclusion
Every industry and every individual business within an industry contends with different levels of risk, both in terms of the probability of something happening and the severity of the consequences. So be prepared to handle the business risk.
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