Building a business takes work—and risks. But some
risks are more dangerous than others. Here are a few risks that every business
owner should keep in mind.
Running a business takes hard work, which can reap
the rewards of customers, revenue and satisfaction. While success is the
ultimate goal, business risk may stop you from achieving the goals you set.
When it comes to risk management,
there are steps you can take, however.
Here are seven types of business risk
you may want to address in your company.
1. Economic Risk
The economy is constantly changing as the markets
fluctuate. Some positive changes are good for the economy, which lead to
booming purchase environments, while negative events can reduce sales. It's
important to watch changes and trends to potentially identify and plan for an
economic downturn.
To counteract economic risk, save as much money as
possible to maintain a steady cash flow. Also, operate with a lean budget with
low overhead through all economic cycles as part of your business plan.
2. Compliance Risk
Business owners face an abundance of laws and
regulations to comply with. For example, recent data protection and payment
processing compliance could impact how you handle certain aspects of your
operation. Staying well versed in applicable laws from federal agencies like
the Occupational Safety and Health Administration (OSHA) or the Environmental
Protection Agency (EPA) as well as state and local agencies can help minimize
compliance risks.
If
you rely on all your income from one or two clients, your financial risk could
be significant if one or both no longer use your services. Start marketing your
services to diversify your base so the loss of one won't devastate your bottom
line.
Non-compliance may result in significant fines and
penalties. Remain vigilant in tracking compliance by joining an industry
organization, regularly reviewing government agency information and seeking
assistance from consultants who specialize in compliance.
3. Security and Fraud Risk
As more customers use online and mobile channels to
share personal data, there are also greater opportunities for hacking. News
stories about
data
breaches, identity theft and payment fraud
illustrate how this type of risk is growing for businesses.
Not only does this risk impact trust and
reputation, but a company is also financially liable for any data breaches or
fraud. To achieve effective enterprise risk management, focus on security
solutions, fraud detection tools and employee and customer education about how
to detect any potential issues.
To find out more about Cybercrime insurance click here:
4. Financial Risk
This business risk may involve credit extended to
customers or your own company's debt load. Interest rate fluctuations can also
be a threat.
Making adjustments to your business plan will help
you avoid harming cash flow or creating an unexpected loss. Keep debt to a
minimum and create a plan that will start lowering that debt load as soon as
possible. If you rely on all your income from one or two clients, your
financial risk could be significant if one or both no longer use your services.
Start marketing your services to diversify your base so the loss of one won't
devastate your bottom line.
5. Reputation Risk
There has always been the risk that an unhappy
customer, product failure, negative press or lawsuit can adversely impact a
company's brand reputation. However, social media has amplified the speed and
scope of reputation risk. Just one negative tweet or bad review can decrease
your customer following and cause revenue to plummet.
To prepare for this risk, leverage
reputation
management strategies to
regularly monitor what others are saying about the company online and offline.
Be ready to respond to those comments and help address any concerns
immediately. Keep quality top of mind to avoid lawsuits and product failures
that can also damage your company's reputation.
6. Operational Risk
This business risk can happen internally,
externally or involve a combination of factors. Something could unexpectedly
happen that causes you to lose business continuity.
That unexpected event could be a natural disaster
or fire that damages or destroys your physical business. Or, it might involve a
server outage caused by technical problems, people, or power cut. Many
operational risks are also people-related. An employee might make mistakes that
cost time and money.
Whether it's a people or process failure, these
operational risks can adversely impact your business in terms of money, time
and reputation. Address each of these potential operational risks through
training and a business continuity plan. Both tactics provide a way to think
about what could go wrong and establish a backup system or proactive measures
to ensure operations aren't affected.
The services of an Independent Insurance Broker is crucial, as they can help
mitigate these risks though a tailor made insurance policy, drafted specifically
for your needs and requirements. To have direct access to a broker in your area
click he
7. Competition (or Comfort) Risk
While a business may be aware that there is always
some competition in their industry, it's easy to miss out on what businesses
are offering that may appeal to your customers.
In this case, the business risk involves a company
leader becoming so comfortable with their success and the status quo that they
don't look for ways to pivot or make continual improvements. Increasing
competition combined with an unwillingness to change may result in a loss of
customers.
Enterprise risk management means a company must
continually reassess their performance, refine their strategy, and maintain
strong, interactive relationships with their audience and customers.
Additionally, it's important to keep an eye on the competition by regularly
researching how they use online and social media channels.
Accept, But Plan
Although you will never be able to completely
eliminate business risk, proactively planning for it can help. Awareness is key
in helping you save money and time while protecting the trust, reputation, and
customer base you've worked so hard to achieve.
For assistance with your risk management and insurance solutions you can call
031-5021922 or visit our website www.esbrokers.co.za.
Photo’s by: Pixabay
By John Boitnott
Writer, Business
Trends & Insights Contributor
Featured in American Express