5 ways to minimize your business risks
It is safe to assume that risks are an eternal blessing in disguise. For some, they are a fatal threat, and for others, they serve as motivators.
Whether you’re a small startup or a major conglomerate, you may face potential failures and long-term risks in a competitive market.
In reality, business risk management is an essential task that serves as a major driver in a business’s success.
Did you know that the estimated figure of US startup businesses that have failed is around two-thirds?
So, what are the potential risks that your business might face?
Let’s take a look at some of them below:
- Thefts of equipment, sensitive property, data, etc
- Financial risks
- Market growth risks- an abundance of competitors
- Rules and legislation affecting your end-products
- Health risks- to employees, customers, owners, other staff, etc
- Natural disasters
- Political unrests/ instabilities
- Loss of consumer or business confidence
- Economic backlashes (recessions, etc.)
So, let’s get down to the real reason why we are here. By genuinely evaluating the potential risks your business might face in the future, you can avoid substantial losses, consumer dissatisfaction, bad reputations, and penalizing bankruptcy.
Minimizing Business Risks- 5 Ways
- Set Priorities
How can you manage your business risks? You should start by determining what potential risks you face.
You can use timelines like a month, quarter, year, or two-year to assess your business’ growth and performance against potential failures or threats of the future.
Aside from that, you can start with common business risks that you think you are likely to face. Highlight them, raise awareness, and set priorities to reduce their chances of occurring.
Judge the setbacks that each business risk poses. Eventually, establish a list of business risks. Remember, while “Prediction” isn’t absolute, it is essential for goal creation.
- Reduce Liabilities
This is more of a personal risk associated with major business risk developments. Types of liabilities for a vast range of businesses include leases, bonds payable, taxes payables, etc.
Correspondingly, it is viable to consider turning into a corporate or an LLC (limited liability corporate/ company). Hence, reduce the chances of losing personal assets if the business busts!
- Handle Credit Customers
Consider this; you have an abundance of customers, and you supply raw materials for manufacturing or retail.
Supposedly, one of your major buyers goes into bad debt or total bankruptcy. What do you do? For one, if he’s gone bankrupt, there isn’t anything to do besides filing a corporate lawsuit.
Therefore, you lose your future payments and a potentially rewarding customer for the business.
Nevertheless, the conclusion of such an example highlights the need to conduct intricate assessments of your customers’ credit scores, as well as those of your suppliers.
Keep in mind, making credit sales to buyers with a bad credit history is a great financial risk!
- Business Diversification
Even though it is highly improbable for a majority of businesses, diversifying the client portfolio is among the best strategies that you can adopt to minimize your business risks.
Selling to a variety of customer demographics (age, sex, income, location, etc.) reduces your business’s risks of losing revenue if the market faces a loss.
Similarly, you can diversify your product or service portfolio.
Hence, your business might possess a wider range of goods to generate revenues in case a few go obsolete or fail to generate the desired traction.
- Risk Management
Altogether, assessing, evaluating, and managing risks using several optimal strategies are time and energy-consuming tasks.
Yet, you can benefit by incorporating a team of individuals or groups capable of operating as risk managers of your business.
Consequently, they will generate risk plans and strategies for you, wait for your approvals, and execute according to your instructions while you focus on other key aspects of your business.
In conclusion, it is safe to assume that risks are an eternal blessing in disguise. For some, they are a fatal threat, and for others, they serve as motivators.
Consider yourself among the latter, but keep in mind the consequences for the former. In short, be proactive then becoming reactive.