Regardless of the type of firm that you run, business risk is inherent. It is unavoidable and it must be identified and managed correctly. As they say, if it can go wrong, it will go wrong! The best business managers see the risks and take precautions, but they also consider the relationship between risk and reward.
Businesses take risks all the time including launching new products, entering new markets, or hiring a new team. Without a certain degree of risk a business will stagnate and soon be overtaken by its competitors.
When it comes to risk management, you should be clear on what your objectives are. Without this you cannot identify which risks are worth taking. Every business needs to leave space for innovation but those innovative ideas must also come within the bounds of the firm’s risk appetite.
It is worth taking the time to identify the risks to your business by creating a risk register. In creating your risk register you should consider factors such as operations, finance, staff, capability, customers, market share, regulation, compliance and so forth. The risk register should be updated on a regular basis – ideally as and when new risks become apparent.
Once you have created your register, you then need to put measures in place to reduce the major risks to your business. You should also prepare a contingency plan which creates a roadmap for dealing with particular risks and guides your team through the necessary steps to minimise the overall threat to the business.
When creating strategic business plans for your firm, you should consult the firm’s risk register and try to build risk minimisation factors into your plan. You can also build a strategy that is compelling given the firm’s appetite for risk generally. No matter whether your business is high or low risk, you should expect the unexpected and plan for when things go wrong.