Posted on

Help Your Business Assess and Manage Risk with These Tips

artchick_hard_at_work_theridgewoodblog

Every successful business owner knows one thing: if it can go wrong, it most probably will. Generally speaking, life always has a way of disrupting our progress with the unexpected, and this becomes exponentially more probably in the world of business. So what’s a businessman to do in the face of the unknown? How can you ensure that your business keeps moving forward, even in face of the unexpected? Enter the risk plan. 

For the sake of simplification, any risk plan consists of three steps. First, you assess the probability and intensity of the risk. Next, you devise a risk prevention plan to protect your business from the unexpected circumstances that you’ve managed to somehow expect. Finally, you deal with the unforeseen circumstances as they occur. Let’s see how you can do that efficiently.

Assess Risks

In your efforts to analyze your current situation, you’ll first identify possible risk factors. Here’s how to carry a proper risk assessment.

Prioritize

Not all risks are equal in their impact. While assessing your risks, there’s a universal scale that businesses everywhere follow to categorize their risks, and you can benefit from it as well. This scale categorizes risk based on two factors: impact and urgency. 

Here’s how this scale goes:

 

  1. High-risk, high-urgency
  2. High-risk, medium urgency
  3. High-risk, low-urgency
  4. Medium-risk, high urgency
  5. Medium-risk, medium-urgency
  6. Medium-risk, low-urgency
  7. Low-risk, high-urgency
  8. Low-risk, medium urgency
  9. Low-risk, low-urgency

 

The higher the risk and urgency, the more crucial it is to devise a risk management plan. It makes all the sense in the world to direct the efforts to prevent bankruptcy (high-risk, high-urgency) rather than fill the empty coffee-corner (low-risk, high-urgency). By prioritizing your risks and threats, you’ll get a better perspective regarding the actions you need to take. 

Invest in Data Analytics

Sometimes, a low-risk occurrence may have a huge financial backlash on your business. However, you never noticed because it looks like a docile little risk. That’s where data analytics come into play to get you aware of the bigger picture. Data analytics have the ability to scan through billions of information and connect the dots you’ll most likely miss. To get the most accurate analytics reports, it’s worthwhile to get alternative credit data instead of just relying on traditional credit data. As the pioneers of alternative data at MicroBlit.com believe, every successful company needs the right kind of information to make sound decisions. That’s something you can only get from alternative credit data. 

Preventive Measures

Next comes the preventive measures you take to prevent the risk or threat from taking place. Here are some examples of industry-proven preventive measures.

1. Buy Insurance

Depending on the kind of business you’re running, your insurance needs will vary. In order to know what kind of insurance you need, you’ll need to seek the guidance of an experienced lawyer who can help you assess liabilities, identify legal regulations, and direct you to the kind(s) of insurance your business needs. It’s safe to say that any business will need general liability insurance, and you may also need life insurance, workers’ compensation insurance, disability insurance, professional insurance, or others. Insurance will cushion the blow of anything that goes south. 

2. Limit Liabilities

Just because you have insurance doesn’t mean you should stop being careful. You’ll still have to take preventive measures against worst-case scenarios, which can be quite probable in the case of dealing with high-risk clients. An example of these clients are those with poor credit, so unless they pay in cash, you should avoid dealing with them. The same goes for your company’s legal structure, with a corporation or an LLC being much safer options than a sole proprietorship. 

3. Implement a Quality Assurance Program

The best way to minimize risks is to ensure proper and constant quality. That way, you’ll never have to deal with angry customers or, in the worst-case scenario, face lawsuits for malfunctioning products. That can be by designating a quality assurance program that tests, analyzes, and ultimately optimizes what you have to offer. 

Dealing with the Risks

What if the worst happens, despite all your efforts and careful calculations? You’ll need to be prepared to take quick and efficient action, and that’s why it’s crucial to designate a risk-management team. This team should be qualified enough to recognize the scope of the risk and take adequate action. They’ll have to decide whether they’ll transfer the risk to an assigned individual, tolerate the risk with careful monitoring, treat the risk by taking measures to minimize its impact, or terminate the risk completely. 

Risks and threats have a way of destroying the progress you’ve worked so hard to achieve. The only silver lining you have is that predicting risks is not impossible. After identifying and assessing the risks, you can protect your business by implementing preventive measures and enacting a risk-management protocol for swift action. 

 

Leave a Reply

Your email address will not be published.