Types of Business Risks and the Proper Responses
Risk is uncertainty that matters.
It is the life blood of business. No risk implies no return. Business take risk all the time including launching new products, entering new markets, advertising, launching a new web site. Without them your business will stagnate and soon be overtaken by your competitors. There are a number of simple steps to follow to ensure you fully understand your business risks
Steps to Follow
1) First be clear what your objectives are. Without a clear view of you business objectives you cannot know what risks you take. Every business need to leave space for emergent strategies but having poorly defined objective means that you are not controlling your own destiny but just responding to the strategy of others.
2) Identify the risk to your business You can use a wide range of techniques to help you look at other companies what problems have they had, talk to people you meet in business circles to test out your ideas, get a team together to brainstorm your ideas. Typically these can be in the following areas:
a) Staff and capability
d) Product performance
3) Prioritise your risks based on the likely hood of occurrence and the consequences on your business. This way you can identify what is critical to your business. Be especially careful about any systematic causes which apply across your business. The real danger with these systematic causes is a form of organisational blindness or group think. As a result people in your business may dismiss these causes as unrealistic. You can seek external views to help identify these systematic causes in a realistic ways.
4) Plan reduction measures for the most important risks. Actions can include
a) Avoid by reducing the scope of you ambition
b) Transfer to someone who is much more able to manage the risk, either through a contract or insurance
c) Plan mitigation activities to reduce the likely hood or impact of the risks
d) Accept that the risk may happen but prepare a contingency plan to maintain you business revenue stream