How to Effectively Identify Business Risks (and how to deal with them)
Long term business success requires understanding the nuance of risk and how to manage business risks that arise.
Table of Contents:
Cultural and business icon Richard Branson once famously said, “You can’t run a business without taking risks. The brave might not live forever, but the cautious do not live at all!”. As one of the most innovative business magnates of all time, Branson understands the inner workings of business risks intimately. Regardless of the size of the business, irrespective of the number of investors, and notwithstanding the amount of experience running an organization – there is no such thing as a business venture that is without business risk.
But what is business risk? It is a term that is thrown around freely and generally accepted, but when pressed for details, many entrepreneurs and start-ups fail to be able to provide any specifics. Before one can learn how to manage business risk, it is critical to understand what business risk actually is.
Types of Business Risks
Not all business risks are created equal. Often, the concept of business risk gets lumped into one general category, when in reality, the impact and effect of each type vary wildly. Before one can hope to deal with business risk and mitigate the potential impact, it is critical to understand the various subtypes of risk.
Often what business start-ups and entrepreneurs associate all business risk as. Strategic risk typically requires a certain level of blind faith, as the end results and outcomes simply cannot be predicted. This type of risk usually requires some form of organizational re-direction or business adjustment.
In many ways, nearly every business risk can also be considered a financial risk, as every organizational decision can have an impact on business profits and sustainability. From taking on large amounts of debt to not hiring enough talent to account for increased orders, financial risk is related to any number of business decisions.
For every start-up and entrepreneur, business risk is synonymous with personal risk. With personal finances on the line, years of effort and energy, and emotional investment, the personal risk is often the type of business risk that prevents start-ups from ever getting off the ground.
In business and life, one thing remains true: Reputation is everything. One of the often-overlooked business risks faced by organizations is the impact on both their business and personal reputation.
The world is not predictable – and regardless of how bulletproof a business plan is or how solid the financial plan is, external impacts from geopolitical influences, natural disasters, or environmental factors can derail even the most solid business.
As the old saying goes, “We’re only human.” Ultimately, everyone makes mistakes – and accepting that human error and misbehavior is possible is a business risk that cannot be overlooked. But you can minimize this type of risk by hiring a good development team.
How to Manage Business Risks
With an understanding of the various business risks every start-up or entrepreneur faces, the question then becomes how to deal with risks. Business risk management requires understanding that there is no such thing as a risk-free venture and that in order to find great success, one must be willing to accept a certain level of risk. Once that has been accepted, it becomes critical to prepare for risk and understand how to best manage business risks.
- Create a balanced risk management team that is comprised equally of risk-averse individuals and team members who are thrill-seeking, risk hunters.
- Understand the financial risk with every situation and limit the liability of the organization by assessing the value-add the risk potentially carries, and whether or not you could survive if it failed.
- Insurance. Insurance. Insurance. Insurance is literally a product that helps mitigate risk, and it is an absolute must in business.
- Always have a Plan B ready to fall back on in the event that the business risk goes wrong, and establish an understanding of your organizational risk priority.
- Create an unflinching, trustworthy, and competent QA program that will deliver honest advice and knowledgeable insight. This will help reduce the impact of business risk, mitigate negative outcomes, and limit the overall risk assessment of the organization.
Business risk is unavoidable if you want to succeed. Nothing in life is without some level of risk, but steps can be taken to reduce the likelihood of some risk and limit the impact of it when it occurs. The team at StarNavi is comprised of a robust team of business risk mitigation experts who are solely focused on helping businesses face risk in a healthy, productive, and protected way. If you are looking for QA experts who will help your business eliminate before it starts, contact StarNavi today and begin your pathway to truly living your business dreams.