How To Manage Business Risk – 4 Things To Consider


Whenever launching a business there are so many steps that have to be taken and things that need to be taken into account. Unfortunately, risk assessment is something that usually lacks. There is this belief that nothing wrong can happen to a company, which is completely incorrect. However, taking risks is a huge part of business. If you do not take any risks, it is impossible to grow, get new clients or consider some new suppliers.

It is normal for business risk to make you quite nervous but this does not mean there is nothing you can do to reduce that. The idea is to manage business risks in order to be sure that it will not negatively affect you in the long run, no matter what happens. While many think this just means mitigating cash flow risks, many other unwanted situations can appear. You need to be aware of them. The 4 strategies highlighted below help limit risks in the event that something really bad happens.

Risk Mitigation

Risk mitigation means you create contingency plans. In the event that risky situations materialize, a Plan B is activated. For instance, let us think about the outside promotional event that you participate in to increase brand awareness. One risk that can easily be identified is rain. That can affect potential event profit and attendance. You want to mitigate the risk so a way to do that is to rent large tents that can offer rain shelter.

Risk Avoidance

In the event that risk consequences are simply too high, the situation is drastic and the best thing that could be done is to completely avoid the risk. This is normally done by just stopping or canceling the business initiative that is determined as high-risk. As an example, let us say that you hear about the possibility to use Ripple trading to increase finances. The risk can be high in most cases so it is better to just not do it. Also, when you launch a brand new product and the finances of the company would be crippled by this, the launch should be delayed until finances are stabilized.

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Risk Transfer

Just as the name implies, this practically means that risk is transferred to someone or something else. Such a situation is usually applied to financial risks or situations in which risk transfer can be added to written contracts. The best example of this is when you insure yourself against fire risk. It is the insurer that ends up carrying the current financial risk associated with fires destroying the warehouse.

Risk Acceptance

This is one thing that is rarely considered or calculated by those that know the basics of risk management. There is always the option of doing nothing. However, this is only good when you make an informed, conscious choice. You accept risk and do not do this by default because other options were not carefully analyzed. Such a strategy is really useful in the event that risks are small, impact is not that big and you want the startup to grow faster. Alternatively, risk acceptance also works when there is a really low possibility of the risk happening, like a warehouse being hit by a derailed train. Even so, although situations might be extreme, it is still a really good idea to have a plan B in place.


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