Every business owner understands that there are risks associated with every business they are delving into, but what many fail to put in place are proper risks management strategies. Business risk management has become a household topic in recent years largely because the economy isn’t as strong as it used to be prior to 2008. The economy is quite unstable, so much so that an unexpected surprise can obliterate your business in one fell swoop if you didn’t put a proper business risk management strategy in place to prevent – or at least mitigate – the consequences of these risks on your business. In this light, you will find some plausible ways to manage any potential risk associated with your business in the context of this article.
The first step to creating a business risk management plan should always be to prioritize threats to your business. Regardless of your business type, there are some universal ways to prioritize business risks based on threats that are:
Very likely to occur
Large chance of occurrence
Small chance of occurrence
Very little chance of occurrence
Hence, a risk that falls into the first category should be prioritized over the others in terms of prevention or mitigation.
Controlling the growth of your business is largely dependent on the type of training you give to your employees. If you are selling a product and you set lofty targets for your employees and/or marketers, they might be tempted to take some unnecessary risks, which could damage your brand’s reputation. Instead, train and educate your employees to focus more on quality rather than quantity. This will help you deal with the risk of sales decline which result from high-pressure sales tactics, many of which are not appreciated by most customers.
Limit High-Risk Trades
If you are a business start-up, make sure you don’t engage in so many risky trades. As a rule, immediately you start your business, implement a standard that customers with poor credit score must pay ahead of time, which will prevent complications down the road. This tip also comes in handy when you are on the verge of launching your short-term investment ideas into reality because you need to be careful not to be dealing with traders with poor reputation and negative trading history.
Implement a quality assurance program
A good reputation is imperative if you want your business to continually thrive. And good customer service is a key to success whether you are selling products or offering services. Before taking your products or services out to the consumer, be sure to test and double-check them to be certain they are of good standard. This is a good way to manage any risk of damaged reputation, which is bad for any business. The moment you start offering below-par products and services, you run the risk of jeopardizing your business reputation.
If you are a sole proprietor, you may want to consider limiting your liability by switching to a corporation or limited liability business. This will ensure the safety and continuity of your business even in times of economic failure. Changing to a corporation or LLC company allows you to subsidize your business risks.
Appoint a risk management team
If you want to save capital by not hiring an outside firm or individual to help manage your business risk, you can appoint current employees to head a risk management department. However, this will only be effective if you already have someone within your ranks who has the right experience and who can act as a leader. In the absence of that, it is strongly recommended that you should invest in hiring a risk management firm. These firms are able to map out all the risks that are peculiar to your type of business and set up strategies to implement in the event that any of those risks become reality.
If you want to genuinely eradicate the consequences of risks in your business, you should consider buying insurance. Although this might eat a part of your capital at first, but in the long term, you will realize that it is worthwhile because it allows you to transfer your risk to the insurance companies. Assess legal regulations and liabilities to know what types of insurance will be best for your business. This might include:
Completed Operational Insurance