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Business risk is a future possibility of incurring misfortune or loss, which may prevent you from achieving your business goals if not properly managed.
The risk associated with running a business is what is referred to as business risk. The risk can be higher or lower from time to time.
Every business organisation faces various risk elements while doing business due to uncertainties - for example changes in tastes, change in preferences of consumers, increased competition, changes in government policy, obsolescence.
A typical business is faced with several kinds of risks that include things within your control and things beyond your control such as the national or global economy among others.
In other words, Business risks arise due to the influence of two major factors: internal factors (events taking place within the organization) and external factors (events taking place outside the organization)
Internal risk factors may include: human factors (strategy, management ability), technological factors (emerging technologies), and physical factors (failure of machines, fire or theft)
External risks arise from factors (exogenous variables, which cannot be controlled) such as economic factors (market risks, pricing pressure) natural factors (floods, earthquakes) political factors (compliance demands and regulations imposed by governments)
It may surprise you to note on one hand, that generally, it is impossible to achieve business gains without taking on at least some risks. This suggests, therefore, that there is a strong relationship between risk and reward, but the most crucial matter around it is to know how to intelligently mitigate risks.
Risk management does not imply completely eliminating risk rather it seeks to optimize the risk-Reward ratio of your business.
Everyone wants to forge ahead all alone, it is virtually impossible to manage your business risks merely by your head knowledge. Experienced management consultants can be engaged to generally manage the possible risks involved in running your business. It becomes their responsibility and no longer yours, as they will have to employ their expertise and insights in analyzing the possible risks involved in your business and advice accordingly
If the customer need is obvious and large, the calculated risk is in the quality of your solution. If the quality of the services or solutions you provide is such that cannot keep customers or attract new once, then the business is at risk. This risk can be mitigated with the right resources.
Initiate marketing plans that come from both inside and outside the box but have milestones and measurements. Use information about the current trends to adjust your business plans from time to time.
Trying to save money by recruiting family members, or hiring only interns, is a bad risk. Great team members may take more time to find, and cost you stock options, but a qualified and highly motivated team that stretches your budget is a well-calculated risk management plan.
More money is not more likely to solve your problems or reduce your risk. Strategically, you need a good financial plan to survive. As much as possible, avoid external funding if you can, because certain terms and conditions associated with some outside funds are risky.
Opportunity and revenue projections based on deep market and customer analysis are a smarter risk. Don’t rely on forecasts to reduce risk. Becoming regularly abreast with current market trends is also a way to mitigate risks.
Many entrepreneurs think they can reduce and predict risk by emulating previous winners relying on stealing customers from other big counterparts to survive is riskier than attracting new customers looking for a solution. Customers like leaders, not followers.
Risk management is one critical activity that business leaders need to give severe attention to because almost everything in life involves taking a risk. More so because becoming a victim of business risk is often frustrating and demoralizing. It pays to learn from the experiences of others (entrepreneurship and business experts) that have gone before you. Seek help on risks management.
As an experienced consulting firm, Gabriel Domale (management consulting) Ltd can help you manage your business risks. Contact us for expert risk management
How to manage the different common types of risks as highlighted in this article will be discussed as the series continues. Stay connected!
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(Associate Consultant)
Port Harcourt | Nigeria
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About us: Gabriel Domale Consulting, a leading management consulting firm, helps companies in Africa to grow, provides insights to leaders and transforms institutions. Our consultants utilize their decades of hands-on experience to provide advisory in finance, strategy, corporate governance, transformation and leadership training to help companies and public institutions to transform their operations. We encourage leaders seeking insights to visit our BLOG here and also Request For Proposal (RFP) for our consulting services here
Published origninally on 18th Feb 2020 09:11:57
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Do you want my team to help restructure your business for higher productivity?