Business Risks and How to Manage Them

As a business owner or a business-owner-to-be, you should be in the know that running a business comes with many possible risks. How damaging these can be to the business depends mainly on handling and managing your situation. If you and your team are not prepared, business risks can be time-consuming and expensive to repair. So, regardless of how big your business is, you need to be informed of what can be expected and how to manage it.

The first step is to identify risks successfully. If and when the situation presents itself – being prepared can minimize costs, time, and productivity losses. An excellent strategic business planning can’t go without the ability to identify possible risks. Here are some useful insights to make the whole experience easier.

risk management

Physical Risks

When speaking about physical types of risks – you need to think about fires, explosions, or any hazard that can lead to potential building risks. So, what can a company do to stay prepared?

  • All staff members should know the exact address so that they can call emergency services;
  • Everyone should be adequately informed about the location of exits (emergency ones too);
  • Smoke detectors and alarms are a must.
  • A sprinkler system may be additional protection in case of a fire or explosion.

Another risk that falls into the category of physical risks is a hazardous material. If your company uses it – accidents are a real threat. Materials that present a real threat are acid, toxic dust, fumes, waste, and gas. Being alert in this scenario means equipping your staff with the tools they need for handling these materials properly and training to do it safely.

Location Risks

As the name implies, these risks are closely connected with the location you choose for your business venture. Risks of this kind can be earthquakes, tornados, nearby fires, floods, and other natural disasters. As for managing the situation, if these things do happen – you need to make sure that all your employees know the surrounding streets well, have full tanks in their vehicles, and maybe consider insurance in case of a natural disaster. Another helpful tip is to consider all these natural risks when choosing a location – some parts are more prone to these accidents than others.

 

Human Risks

The most dangerous risk when it comes to your employees is drug and alcohol abuse. Anyone suffering from this should seek treatment, counseling, or, if necessary, even rehabilitation.

Another human risk that, unfortunately, many companies face is embezzlement. You also need to consider theft and fraud as possible risk factors you need to be prepared for. No one wants this – but it happens. One thing you can and should do is to apply a double-signature system for invoices and checks. Also, you need to make sure that you trust your accountant and that he/she makes an in-depth accounting analysis as often as it is needed.

All in all – background checks before hiring new people are strongly advised. It is a useful technique for finding out any past drug or alcohol abuse or any past connected with embezzlement or fraud.

And lastly, human risks include illness or injuries. If this does happen, you can avoid losing productivity by training backup staff members. They can easily and quickly handle the work when there are absent workers.

Technology Risks

The most common of them all is probably the risk of a power outage. If this occurs, it is smart to have gas-operated power generators not to lose electricity. This way, business operations can continue working without any unnecessary interruptions.

Another risk connected to power outage is the risk of losing important documents and files stored in computers. More often than not, when electricity is down – computers can be damaged. So, again – backup systems for this type of risk are a must too. Surge-protection computer devices are a thing, a thing you need to have.

Business Risks and How to Manage Them

Risk Assessment

Once the identification is made – the next big step is to prioritize these risks by the probability of them happening. Risk assessment helps you understand whether a specific investment is worth the cost and the best ways to manage and mitigate risks.

You can create a scale that can help with this. Here is an idea:

  • Very likely to happen;
  • Some chance of happening;
  • Small chance of happening;
  • Very little chance of happening

You can also hire experts that do actuarial tables and use statistical analysis for in-depth knowledge of how probable risk can be.


Author Bio: Hannah Derby is a proud Economics major and a business plan consultant who is on top of every hot trend globally. She often blogs about current and offers her insights to her readers, which many times have proven helpful and useful. She loves walking with her dog Lassie and enjoys a beer in the nearest pub in her free time.

Business Risks and How to Manage Them

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