Business risk comes in all sizes and shapes. If you minimize these risks, then you have a much better chance of sustaining your company and even growing more. While great risk often brings great reward, most business owners try to avoid risky situations.
Ultimately you won't be able to avoid business risk forever. So, at the very least, you should figure out how to minimize it. You don't want this risk to adversely impact things like cash flow, reputation and business continuity.
You need risk management solutions that will help you and your company avoid most business threats. Here are three strategies you can take to minimize those risks.
1. Understand what situations involving risk may be worth taking vs. those that aren't.
Let's start with what falls under the category of risk worth taking. A “good" business risk often leads to new audiences and customers, market opportunities and capabilities. It's one that you can thoughtfully assess and measure before taking action. It could be a risk worth taking if you can spot potential mistakes ahead of time and create strategic plans to avoid them.
New product introductions, market entrances, technology investment or new customer experience processes often involve risk. However, these are all good risks when planned out carefully, because they have the potential for a strong return on investment.
In contrast, risks that just aren't worth it include anything that can endanger product or employee safety. Bad risks often involve strategies that break regulations, compliance or law. It may be a bad risk if the decision feels rushed or you're unable to analyze the situation thoroughly ahead of time. Work hard to reduce or eliminate these types of risks for your business.
Also, consider your team's appetite for risk. Do team members enthusiastically dedicate themselves to new initiatives, or do they struggle to stay effective under increased pressure? If you've got a risk-averse group of people on your team, perhaps they're not confident enough to execute certain projects. Don't be overly optimistic or “blind" to potential risks. Only you know the right road to take based on your team's personality.
2. Look outwards and inwards to study potential risks that could hurt the business.
Yes, sometimes risks come from within. Internal risk can take the form of team members who lack knowledge, skill or experience. When combined with certain situations that have higher risk potential, this internal influence could make damaging outcomes more likely.
Outward risks might come from environmental, economic, political, legal or social factors. For example, new laws may impact what you can sell and where. Or, an economic recession could harm your revenue for an extended time. This might cause your business to no longer be sustainable, forcing you to shut it down.
You may not be able to adequately address outward or inward risks entirely. However, by knowing those risks are possible, you can implement strategies to counteract them.
For example, you may want to conduct in-depth training for your team that addresses risk-laden situations. The training might entail teaching them what to look for when it comes to identity fraud or how to protect passwords and sign-in information. Or, in a manufacturing or industrial environment, training could involve discussion of potential dangers and how to enact safer practices.
With outward risk, you may have less control over when and how the risk appears. But, you can still take steps to minimize risk from impacting your business. For example, market trends often signal a potential recession. You might also spot dramatic changes in your audience's product preferences that might impact whether they buy from you or not.
This means continually evaluating actions in the market that send up red flags. You can also adopt a strategy to seek out new revenue streams and audience segments. Other actions might include building a lean budget focused on sustainable cash flow and savings for those slow periods.
3. Have a proactive risk management plan in place.
A proactive risk management plan should include tactics and messaging. These components would address the internal and external risk situations previously mentioned. Make sure to include a section in your plan for each of these types of risk.
Once you've created your risk management plan, use it to educate everyone at the company. Focus risk management training on how each team member plays an active role in avoiding or mitigating business problems.
Don't be overly optimistic or “blind" to potential risks. Only you know the right road to take based on your team's personality.
Even if a specific area of identified risk does not impact a certain department or individual, they should still know it exists. What affects one part of a company impacts the others in one way or another. Employees who don't deal directly with a threat may be able to share an idea or solution that could minimize risk for another part of the company.
Keep Risk Where It Belongs
Risk management solutions provide effective ways to manage risk in business. Implementing these solutions can help remove risk from as many processes and interactions as possible. The result will help increase your ability to sustain and grow the business as well as help maintain your brand's stellar reputation.
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