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Business Risk Management: How You Can Navigate Challenges as A Small Business Owner

Victor Ifegwu Mbonu
Business Risk Management
  Running a small business in Nigeria comes with its fair share of challenges. From fluctuating market conditions to unexpected economic changes, there’s always something to worry about. However, one thing successful business owners have in common is how they manage risks. Business risk management is simply anticipating potential challenges and finding ways to navigate through them. As a business owner, if you learn how to handle risks effectively, you’ll be in a much better position to grow your business steadily.
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Understanding Business Risk Management

When you hear the term “business risk management,” it may sound complicated, but it’s simply about identifying some of the things that could potentially go wrong in your business and preparing for them. As a small business owner, your company faces various risks daily, and those risks could be financial, operational, or even reputational. For instance, if there’s a supply chain issue, that’s an operational risk. If the economy suddenly takes a downturn, that’s a financial risk. And if your key staff suddenly resign, that is a management risk. The goal of business risk management is to minimize the impact of these risks and protect your business from suffering long-term damage.

Common Risks Faced by Small Businesses in Nigeria

Below are some of the common risks you might encounter doing business in Nigeria:
  1. Economic Instability: If you’ve lived in Nigeria long enough, you will certainly know that the country’s economy is highly prone to fluctuations. Currently, the country is battling one of its worst inflations in history. These can impact your business expenses, forcing you to adjust your pricing strategy to stay afloat.
  2. Political Changes: Another risk associated with doing business in Nigeria has to do with the political and regulatory climates in Nigeria. The present economic hardship occasioned by the high cost of petrol in the country has its roots in the May 29 “inaugural day address” of Bola Ahmed Tinubu.
  3. Competition: New players entering the market or your competitors adopting innovative strategies can also pose a threat to your business growth.
  4. Operational Risks: These can range from poor management decisions to supply chain disruptions, which are common for Nigerian businesses relying on imported goods.
  5. Human Resource: One of the crucial aspects of any business is the necessary human resources. The associated risks are significant, including an unmotivated workforce, disloyal or dishonest staff, and the potential illness or loss of key personnel.
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How You Can Manage Business Risks

While risks are almost inevitable, you can overcome them if you are well prepared for them. Here are some ways to manage risks as a small business owner in Nigeria:
  1. Identify and Assess Potential Risks
The first step in managing risks is to identify the potential challenges that could affect your business. Start by asking yourself: What could go wrong in the day-to-day running of my business? For example, if you’re in the retail industry, one risk could be fluctuating prices from suppliers. Make a list of the possible risks and assess how likely they are to occur.
  1. Have a Contingency Plan
Once you’ve identified your risks, it’s time to make a plan. Think of this as your “what if” scenario. What will you do if the economy hits a downturn or your key supplier can’t meet your needs? Having a backup plan in place is essential. This could involve diversifying your supplier base or having an emergency fund set aside for tough times.
  1. Get Business Insurance
One of the easiest ways to protect your business is to invest in business insurance. In Nigeria, there are several insurance options designed to cover your business from theft, fire, or damage. Although it’s an additional cost, having insurance can prevent significant financial losses in the event of an unexpected crisis.
  1. Regularly Review Your Business Processes
Risk management is not a one-off thing, it requires you to review it regularly. Your business will grow and evolve, and so will the risks you face. For example, if you expand your business, you might face new risks, such as managing additional employees or dealing with larger inventories. So, it is important to keep reviewing your business operations to identify any new risks and adjust your strategy accordingly.
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Concluding Thoughts

Running a business is not just about taking risks, but also about knowing how to manage them effectively. Business risk management will help you stay on top of your game as a business owner.
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