Lowering the Potential Risks for Your Business
by Carrie Hinkel on March 20th, 2008
Understanding your business’ range of potential risks can help you to manage them, or even avoid them all together. By anticipating risks and potential pitfalls for both your business and the industry as a whole, you can protect your business and improve its success. Here’s how:
Step one: Identify the risks
There are two categories of risks facing companies: risks that directly affect the business and risks that face the business’ industry as a whole. For the former, make a list of potential risks that are affecting your business. It might include things like: specifically-named competition, price increases, material shortages, etc. Identifying the industry risks will take some research on your end. However, the good news is that most of it can be done online. The first place to start will be with the associations operating within your industry. From their websites, see if you can find any research on sales trends or social, economic or environmental issues that may have a direct effect on the industry. Second, do online searches relating to your industry and “risks”, “trends” or “research”. Third, take a look at the quarterly and annual reports for public companies operating within your industry. Many times these companies give a detailed report on risks and potential risks facing the company.
Step two: Rank the risks
Unless you make an effort to rank order the potential risks facing your business, you may very well fall into the trap of constantly putting out small fires and losing site of long-term goals. While all risks are potentially harmful to the business in one way or another, only certain ones demand immediate and undivided attention. Take the time before the risks appear to put them in order of most important to least important. This will require some time to think through the process of how the risk will affect the business and how disastrous the potential outcome could be.
Step three: Prepare an action plan
For each risk, set up a clear policy in order to manage and control it, should it directly affect your business. The policies should be specific, easy to understand and, ideally, quick to implement. The chaotic and stressful time when a business has fallen prey to one of its risks is never the time to create a how-to-bounce-back strategy. Take the time now to develop a process that is clearly thought through and will minimize negative effects.
So, while every business and every industry has potential risks looming, it’s what you can do to prevent or minimize them that will keep you ahead of the competition. An unknown risk is sure to affect an unaware business much more than a known risk to an alert business. Take the necessary steps now to put your business in the latter category. It doesn’t take much time or effort to prepare a risk prevention plan, but the detrimental effects it can avert can prove to be enormous.