There are few things scarier than going all-in on a new venture. As with anything else, there is always an element of risk to it. However, there are steps you can take to better prepare yourself and conduct effective business risk management.
From skydiving to mountain biking, you’re never going to eliminate all risks from a given scenario. The key is to be ready when something does go wrong. Hope for the best, and be prepared for the worst (Wear a helmet, pack a backup chute). The same goes for business. Your journey to the top of the pile isn’t going to be a straight shot, and things are going to go wrong.
How wrong, is up to you.
Types Of Risks
In business, risk comes in all shapes and sizes. It might affect you, your team, or the business itself. Here are some of the types of risk most often faced by owners:
These are things that have the potential to physically harm people (your team or otherwise) to damage your business’s property. Things like hazardous materials, broken or misused machinery, or natural disasters like flooding, storms, tornadoes, and more.
Issues stemming from individual members of the team, such as substance abuse, fraud, and embezzlement.
Any digital problems that will compromise your business. This can be things like cyberattacks, system failures, data loss, and more.
Strategic & Financial Risk
Changes in the market, environment, pricing, or customer behaviour that will negatively impact your business. How prepared are you for payment defaults? What happens if a new market opens up and negates what you do?
Check Out Another Blog: Unstoppable: Business Doesn’t Have A Future
It might sound like it’s all doom and gloom, but we’re not trying to cast this dark cloud over you. If you don’t have a risk management plan, or don’t think it will be important to have one, we’re trying to scare you straight!
The point is that there are so many risks out there it’s impossible to just be reactionary. You have to be proactive. Luckily, there is a 4-step process we recommend following.
Step 1: Identify
Figure out all the potential risks your business might face. Don’t go easy on yourself here! List everything you possibly can, no matter how small it might seem.
Step 2: Analyze
With every possible risk laid out, it’s time to figure out the likelihood of each one happening and what the results of each would look like on your business.
Step 3: Categorize
With likelihoods and potential dangers known, you should now put risks into three categories:
Green: Low risk. Should address, or be concerned about, but can wait.
Yellow: Medium Risk. Needs addressing once top priorities are handled.
Red: High Risk. Should be addressed first and as soon as possible.
For example, something might be unlikely to happen, but the potential downside is too great to ignore (red/yellow). On the flip side, something might be very likely to occur (maybe even more than once), but the potential downside is low enough that you should focus your attention on something more pressing (Yellow/green).
Step 4: Plan
You know the risks, you know what will happen if they happen. Now, what are you going to do about it? Create protocols, assign leadership, and plug holes before something falls through. Also, always remember to revisit your plans on a regular basis! There may even be new risks to discuss.
Speaking of risk, the latest episode of the Thinc. Underground Podcast touches on it when discussing the ever-changing world of trading.
This week’s episode welcomes computer scientist, developer, and analyst, Jacob Amaral. Join host Arif Khan as he speaks with Jacob about trading, risk management, grabbing opportunities, and the evolving role AI is taking in the market. “Right now, there are more opportunities than ever to find an edge and make money through trading.”
It’s an amazing episode, don’t miss it.