Whether you are running a one-man business or you are the captain of an 8-figure enterprise, the risk is always present, and it usually tends to increase as the company grows. However, there is no shortage of risks even for very small organizations. There is risk in every aspect of the business. From customers to vendors to inventory management solutions to even the weather, all these factors pose some kind of risk.
Broadly speaking, risk can be categorized into two main areas. One covers the overall possibility of something going wrong and the other covers the possible consequences of such an event taking place.
The addition of IT and the internet in the workspace has simultaneously increased and decreased risk for businesses. On one hand, it has reduced the dependence on physical solutions and the physical environment that the business exists in, but these solutions are prone to their own problems, which is another form of risk for the enterprise.
The biggest challenge for most organizations that are implementing risk mitigation strategies is actually identifying and assessing areas of risk. Without knowing what the potential problem could be, it’s impossible to create any kind of mitigation or recovery plan.
Here are a few tips to help you improve your ability to assess and manage risk in your organization.
1. Highlight Sources Of Risk
To know where risk can come from, it’s important to understand how different aspects of the business operate and what their weak spots are. In order to get a general idea of this, you could consider a SWOT analysis or a PEST analysis to better understand where you understand. Both of these analysis styles and others like them will give you an idea of both internal and external threats that the business faces. You could further break down these threats into procedural problems, political problems, naturally occurring challenges, training, work quality-related issues, and several other categories of problems. By tucking risks under categories, it becomes easier to manage entire blocks of risk at a time. For instance, if your business is impacted by natural weather a lot, you can look into creating solutions that will insulate you or your products from the weather.
2. Economic Risks
Of course, any problems the business encounters will have an economic impact and might even cost a lot of money to fix. However, certain problems about the money itself are common in a lot of businesses. For instance, if you sell items on credit, or have a rolling monthly balance with clients, that money that you are yet to receive is always a risk. The team at MicroBilt highlights the fact that it’s not just the risk of not getting paid what a client owes you, but it’s also about the risk of your team making accounting errors with receivables. This internal problem is an equally important risk, especially if you are dealing with a large number of clients. To minimize financial risks in a business, the best solution is to opt for a digital accounting system that is updated in real-time with all transactions that take place. This way, you also have a system that you can verify according to dates and times if a difference in accounts comes up.
3. Managing Risk
Managing risk covers a broad spectrum of solutions and the ones you choose will depend entirely on what is feasible for you and what works best for your problem. In some cases, you might be able to reduce risk; in other cases, you might be able to share the risk with other stakeholders, and there are even instances where you might be able to develop a solution that helps you avoid the risk entirely. A very effective way to develop risk management solutions is to test ideas and see how they work in a controlled environment before broad implementation. You could use virtual solutions to test ideas or you could even implement them in the physical world in a controlled manner. If they work out, you could scale up and if they don’t you might consider something else. Either way, you will find out how effective a strategy is without putting all your eggs in the same basket.
The internet has made risk management easier than ever since you have access to a global pool of talent. You can easily find a process specialist to consult with through the internet who you can hire for a few hours to work with you. While in the past only large companies could afford to fly in consultants to help them with a problem, the internet has made it possible for individuals to find cost-effective services online.