How to Deal More Effectively with Risk in Your Venture
As business owners and managers, we have a lot on our plates and many tasks to consider and complete every day. As a result, it’s natural that most of our focus ends up on the here-and-now factors of operations, such as product or service development, marketing, sales, customer service, and finance.
If you want to have a business that lasts a long time and gives you the best results, though, it’s vital to remember that risk is inevitable and can cause many issues. We can’t bury our heads in the sand and ignore this, as much as we may want to. Instead, we must consider risk and make it a regular part of our planning and implementation processes. Here are some ways to deal more effectively with this matter in your venture.
Determine the Key Risks
You can’t take many helpful steps regarding risk if you don’t first work out what kinds of issues you might face in your business. As a result, try to identify which internal and external risks could pose a threat, both in the immediate future and long term. When you work out what to protect your venture against, you can manage the risks sooner and more comprehensively, and you won’t get so blindsided.
Some of the risks you spot will be specific to your industry and business, while some will be more general. For instance, if you’re a retailer, you need to consider supplier risk management for your inventory since this is such a crucial part of the business. If you run a gym or personal training venture, you’ll need to think about public liability insurance if people hurt themselves while training.
Identify risks such as building collapses, health and safety issues, environmental concerns, political and economic instability, and currency fluctuations. Plus, there are strategic concerns related to competitors and compliance factors, like new regulations that could pose a problem. You might also face financial risks from increased business expenses, customers not paying, theft, equipment breakdown, and more. The more risks you identify early on, the easier it is to mitigate them.
Spend Time Planning
Next, allocate time to planning for and against risks, so you minimize the likelihood of issues arising and negative results being too impactful. You should have a business plan that details a SWOT analysis, looking at your organization’s likely strengths, weaknesses, opportunities, and threats. Your plan can also note competitors, changes to the market, and current and impending regulations. It can detail your financial projections and marketing and sales strategies, too, since these will help you deal with risks.
Also, develop a comprehensive emergency management plan. This plan can list potential internal and external emergencies and nut out what your team needs to do if any possibilities become realities. Put step-by-step instructions in place and clarify who is responsible for handling different concerns and in what kinds of timeframes, as applicable.
Compose preparedness checklists that note emergency contact information and any other records that must be kept, the first-aid equipment to purchase, how and when safety training and drills will be implemented, and where staff members should evacuate if needed.
Do What You Can to Minimize Risks and Avoid Catastrophic Outcomes
Be proactive and take steps to minimize risks wherever possible. You can’t prepare for every eventuality, but you can reduce the likelihood of having to face catastrophic outcomes if things go wrong. For example, handle and transport any dangerous goods and materials safely and set up a safe working environment for your employees with clean, tidy workspaces in secure locations. Train your staff on how to store and use items correctly and ensure they use safety equipment.
Utilize insurance to cover your bases in case of natural disasters, litigation, or other problems, and get advice from attorneys, accountants, HR professionals, technical advisors, and other experts on matters where you know risks are something to be wary of. Plus, put contracts in place as needed and keep detailed and extensive records so you have data to use as support if necessary. Back up information to the cloud or other secure networks, too.
You’ll minimize financial risks if you keep close watch of your organization’s cash flow and follow a budget so you don’t spend more than your venture can afford. Keep some business savings on hand for a rainy day. Get tax returns and other documents submitted on time and bills paid by due dates. Also, look for ways to sell to new markets and otherwise diversify income where possible. It’s wise to keep learning from problems that come up over time, too, so you can better mitigate risk in the future.
Dealing with risk is all part of being an entrepreneur. Protect your company by thinking about and addressing all the elements mentioned above.