Every business is faced with potential obstacles and hurdles. From the advent of disruptive technologies to stringent regulations – no success comes without its challenges! Identifying these risks can be vital in building your brand’s future. Learn how to evaluate them right here so that you’re prepared for every challenge on the journey towards achievement.
Identifying Risks
To identify risks, you must first be able to recognise them. There are many different kinds of risks in business, and they are only sometimes easy to spot. However, the following steps can help you determine what types of risks exist in your current model:
- Identify the risks that are within your control (e.g., “The product may not meet customer expectations”) and those beyond it (e.g., “Our competitors could come out with something better than ours”).
- Describe how these scenarios might play out in real life–what would happen if this happened? How would we respond? What resources would be needed? Who would need training/education on how to handle such situations?
Ownership Risks
You are responsible for the risks of your business. You’re the only person who can be held accountable for those risks and their consequences. As a business owner, you should understand the different types of ownership risks that exist and how they might affect your company’s future.
One type is called “ownership risk.” This is when you lose control over or have to sell part or all of your business due to circumstances beyond your control (for example, because another party makes an offer on it). You may also face this situation if there are legal issues with one or more partners in a partnership firm; if one shareholder buys out other shareholders through an equity buyout; or if creditors demand repayment from all partners at once (known as “going into receivership”).
Management Risks
Management risks are those related to the quality of your management team. This can include:
- The risk of not having the right people in place. If you don’t have an experienced HR manager or a skilled executive assistant, you may find yourself struggling to get things done on time–or even worse, unable to do them at all!
- The risk of not having the right people in the right places. Everyone on your team must understand their role and responsibilities within the organisation so that everyone works together effectively towards common goals (and no one is stepping over each other).
- The risk of not having the right people with skills suited for their position(s). When there are gaps between what someone knows how to do versus what they’re being asked or required by their job description and supervisor(s), then there will inevitably be problems down the road–whether those issues come from misunderstandings between coworkers or simply poor performance due lack experience/training needed (or both).
Financial Risks
Financial risks are related to your company’s economic performance. They can be divided into two categories:
- Operational Risk – The risk of loss from inadequate or failed internal processes, people and systems (e.g., fraud). For example, an employee may steal money from the company by creating fake invoices.
- Credit Risk – The possibility of loss resulting from changes in market conditions, interest rates or currency exchange rates (e.g., negative cash flow). For example, if you sell products on credit terms and customers don’t pay their bills on time, this can cause problems for your business.
Litigation and Regulatory Risks
Litigation and regulatory risks are two of the most common categories of risk to consider when evaluating your current business model.
Litigation Risk: This refers to the possibility that you may be sued by a competitor, customer or another party who claims you have violated their rights under the law. The potential costs associated with litigation can be significant (including legal fees), so you must understand how this type of risk could affect your company if it were to occur.
Regulatory Risk: Regulations set forth by government agencies such as FCA, FDA, and the EU. This affects every industry, including yours–and even small changes in these regulations can significantly affect how your business operates daily. For example, if new rules require more stringent safety measures at manufacturing plants, then it would probably make sense for those plants’ owners/operators not only meet but exceed these standards–especially if they want their products sold in specific markets where consumers expect higher quality standards than others might offer
Market and Competition Risks
It’s critical to understand the potential presented by competitors, who can either be a risk or an opportunity. Successfully navigating competition and reaping its rewards requires preparation: ensuring you have both the resources and skillset necessary for success–and then some!
Technology Risks
Technology is ubiquitous in today’s business environment, and organisations must continuously analyse their technology risks. The risk of inadequate system security, outdated hardware or software, cyber threat vulnerabilities, and data loss can have severe implications for any business. Furthermore, the rapid pace of technological change requires organisations to stay abreast of emerging trends and best practices to protect them from potential risks. Therefore, it is essential that organisations plan ahead and regularly evaluate their systems for potential areas of vulnerability to reduce the risk associated with technological failures.
- Technology risks can be mitigated by being aware of them.
- Technology risks can be mitigated by using technology to your advantage.
- Technology risks can be mitigated by staying up to date with technology so that you are always prepared for the next wave of innovation and change in the industry you’re working in.
Your risks are your responsibilities.
Risk management is the process of identifying, analysing, and mitigating risks. It’s a core business competency that you should understand your company’s risks well.
To effectively manage risk:
- Understand what’s important to you. What are your goals? What do you want from this business? How does it fit into the bigger picture? Your vision for the future will help guide decisions about how much risk to take and which course of action is best for your company in specific situations.
- Know where your blind spots are–and ensure everyone else does too! When considering whether or not there are any potential problems with an idea or plan before moving forward with it (as opposed to after), try asking yourself these questions: What could go wrong here? Who might be affected by this decision if something went wrong; how would they be impacted by such an event occurring; what would happen if things went well instead of poorly, and so forth until every possible scenario has been covered as thoroughly as possible within reason given available time constraints/resources available at hand etcetera. Remember, no matter how many precautions we take against disaster; nothing can protect us entirely from harm.
Bottom Line
While it’s impossible to plan for everything, a proactive risk management approach can help protect your business from significant threats. By identifying potential risks and putting mitigation strategies in place, you can give yourself peace of mind and sleep better at night, knowing that you’ve taken steps to safeguard your company’s future. Please get in touch if you need help getting started or would like more information on how we can assist with your risk management planning.
Who am I?
I am Dotun Adeoye, a Business Growth Strategist & Author of the 5 Pillars of Business Growth.
I’ve built up my experience via serial entrepreneurship, consulting leadership roles in business growth, business development and product innovation in large companies worldwide in the last 30 years.
Today, I consult with large businesses on how to sustainably grow their businesses, sustain infinite growth, and ensure business continuity irrespective of the business climate.
Hire Dotun Adeoye to Speak Virtually or In – Person at your company’s event to cover this or other topics. You can also get in touch via +44 203 097 1718 or dotun at dotunadeoye.com.
