Running a business takes hard work, which can reap the rewards of customers, revenue and satisfaction, and since success is the ultimate goal, business risk may stop you from achieving the goals you set.Read more about Business GrowthThere are too many businesses that have closed down because their managers or owners didn’t understand the risks in growing a business. The list of risks when growing a business is a pretty long one, andwhile some risks will be very unique to your business, others are more universal and thus, foreseeable. However there are some that every growing company will come up against, though most business owners can avoid some of the most common pitfalls or risks by having a clear risk management strategy from the start. Here are the types of risks that every business owner should keep in mind.
Financial Risk
The biggest risks facing most growing businesses are actually financial. The business owners often have invested their life savings or taken out significant loans in order to get the organization off the ground, so there is a lot of pressure to be successful. Cash flow is one of the biggest concerns at the beginning, and you must consider where money will come from to maintain operations, pay employees, and invest in market penetration and growth. Depending on the industry, you may have to make a large upfront investment, and it can take a while to begin seeing a return. Careful preparation and planning, as well as support from third parties, can help you mitigate this risk.
Environmental, Political, and Economic Risk
Economic and environmental conditions like hurricanes,earthquakes, wars and recessions are also risks to keep in mind. A serious recession can damage even the wealthiest of organizations and are more than able to put a small organization out of business. There may be a strong market for a product in an under-developed country, but these countries can be unstable and unsafe, or logistics, tax rates, or tariffs might make trade difficult depending on the political climate at any point in time. You must consider the current and future climate and prepare your business, because this process is usually best when it takes place during prosperous times: it allows you to save excess cash and negotiate favorable purchasing terms.Sign up to the Connect Nigeria Daily Newsletter
Cybersecurity Risk
With businesses embracing digitalization and increasingly relying on data and IT systems, the risk of cyber threats has grown dramatically in recent years. Hackers are becoming increasingly skilled and have grown more sophisticated, and can have a long-lasting impact on companies, from financial losses to reputational harm and trust issues as well.Businesses aren’t immune just because they are small and young or big and known, though small businesses often have less sophisticated IT security systems in place, which makes them an easier target for cybercrime. They often do business with larger companies and can be exploited by hackers as a conduit for attacking the bigger players. However you need to adopt a security framework or information security management system that covers the people, processes and technology needed for cybersecurity, allowing businesses to detect security incidents faster, and quickly implement cost-effective measures to minimize the damage.
Reputation Risk
There has always been the risk that an unhappy customer, product failure, negative press or lawsuit can adversely impact a company’s brand reputation. However, social media has amplified the speed and scope of reputation risk. Just one negative tweet or bad review can decrease your customer following and cause revenue to plummet.In order to prepare for this risk, reputation management strategies to regularly monitor what others are saying about the company online and offline should be employed. Be ready to respond to those comments and define the way you interact with the customers and portray the company, both on organizational and personal pages. Considering all risks and planning for how they will be mitigated will help reduce risk-related costs such as insurance premiums and claims deductibles. Good risk management protects the reputation of the company and helps it plan for contingencies. This will make the business more profitable and ensure the longevity of the company.Featured image: Pixel Production inc.Got something you want to read about on our platform? Contact us: editor@connectnigeria.com
