Running a business takes hard work, which can reap the rewards of customers, revenue and satisfaction. While success is the ultimate goal, the business risk may stop you from achieving the goals you set. Unforeseen events can affect your customers and suppliers and downstream.
When it comes to risk management, there are steps you can take, however. Here are seven types of business risk you may want to address in your company.
1. Economic Risk
The economy is constantly changing as the markets fluctuate. Some positive changes are good for the economy, which lead to booming purchase environments, while negative events can reduce sales. It’s important to watch changes and trends to potentially identify and plan for an economic downturn.
To counteract economic risk, save as much money as possible to maintain a steady cash flow. Also, operate with a lean budget with low overhead through all economic cycles as part of your business plan. Put suppliers, banks, professional services you use in competition to ensure you get the best value.
ibd members can help you identify parts of your business at economic risk and help you correct these and make your business more stable Click here to find out more
2. Compliance Risk
This has to be one of the biggest headaches for most business directors and owners. With the yearly increase in the numbers and range of laws and regulations to comply with. For example, recent data protection (GDPR)and payment processing compliance could impact how you handle certain aspects of your operation.
Failure to comply can result in a substantial fine and or a custodial sentence for the directors so ensuring your business and keeping up to date with this ever-changing area is key for your business. ibd have experts in all areas of Compliance & Risk and its simple to get in a local member and look at those areas that need to be brought up to date and then bring in the relevant expert
3. Security and Fraud Risk
More customers are using online and mobile channels to share personal data, through shopping, chat rooms and social media. This also increasingly applies to businesses who are harvesting this information and sharing this across related platforms.. This gives a greater opportunity for the hacking of databases. News stories about data breaches, identity theft and payment fraud illustrate how this type of risk is growing for businesses. This does not just apply to the large business but smaller businesses often fail to identify possible system breach exposure. For example, do you still allow phones or other devices to be plugged into PC’s at work? These devices often have large storage capabilities
Not only does this risk impact trust and reputation, but a company and directors are also financially liable for any data breaches or fraud. You will also lose a vast amount of time dealing with the various government agencies. To see how you and your business is at risk ibd have a number of Cyber Essentials qualified specialists as well as experts in data and GDPR
4. Financial Risk
This business risk may involve credit extended to customers or your own company’s debt load. With the next stage of Brexit, the currency fluctuations we have seen may keep appearing for a little longer. Are you ready?
Making adjustments to your business plan will help you avoid harming cash flow or creating an unexpected loss. Keep debt to a minimum and start lowering your debt levels as soon as possible. If you rely on all your income from one or two clients, your financial risk is significant if one or both no longer use your services or goes bust.
Think about monitoring your payment days on invoices due and increasing your customer base. Are your customers financially secure?
6. Operational Risk
This business risk can happen internally, externally or involve a combination of factors. Something could unexpectedly happen that causes you to lose business continuity.
That unexpected event could be a natural disaster or fire that damages or destroys your physical business. Or, it might involve a company-wide IT failure caused by technical problems, people, power cut or hacking. Many operational risks are also people-related. An employee might make mistakes that cost time and money.
Whether it’s a people or process failure, these operational risks can adversely impact the business in terms of money, time and reputation. ibd have specialist members in operations, planning and disaster recovery.
7. Competition Risk
While a business may be aware that there is always some competition in their industry, it’s easy to miss out on what businesses are offering that may appeal to your customers.
In this case, the business risk involves a business sector leader becoming so comfortable with their success and the status quo that they don’t look for ways to pivot or make continual improvements. The increasing competition combined with an unwillingness to change may result in a loss of customers.
Business risk management means a company must continually reassess their business strategy, and maintain strong, relationships with their audience and customers. Additionally, it’s important to keep an eye on the competition by regularly researching how they use online and social media channels.
Plan now for the future
Although you will never be able to completely eliminate business risk, proactive planning for it can help. Awareness of your business, customers and suppliers is key in helping you save money and time while protecting the trust, reputation, and customer base you’ve worked so hard to achieve. Given how fast the world is changing and the increase in unexpected events now is a good time to check to see how robust those plans are.
ibd have business planning experts who help business owners and directors focus on what they need to do to secure the businesses future.