7 Steps to Manage Business Risks by Suresh Mansharamani
Risk management has always been a critical component of running a business, much more so during times of market downturn. In any economic situation, an unexpected surprise can completely ruin your organization if you do not have the appropriate risk management methods in place to minimize, or at the very least limit, the damage caused by that risk.
External risks are uncontrollable. These are interest rates, currency exchange rates, politics, and the weather. Internal risks are within your control and include data breaches, non-compliance, a lack of insurance, and rapid growth.
According to Suresh Mansharamani the best business coach in India the following are some areas where business owners might focus on reducing business risks:
● Prioritize
Prioritizing risks and threats should always be the first step in developing a risk management plan. This can be accomplished by employing a reasonably general scale depending on the possibility of each danger occurring:
❖ Almost certain to occur
❖ Probability of occurrence
❖ Possibility of occurrence is remote
❖ Remote possibility of occurring
Naturally, a danger that falls into the top category should take precedence over the others, and a plan should be put in place to minimize or at the very least mitigate these risks. There is, however, a catch. If danger is on a lower rung but can cause more financial damage, it should take precedence.
● Buy insurance
Assess your business's liabilities and compliance with applicable laws to identify the forms of insurance that will be necessary. This may involve the following:
❖ Insurance against death
❖ Insurance against disability
❖ Insurance for professionals
❖ Insurance for completed operations
By purchasing insurance, you can shift your risk to insurance companies for a nominal fee, particularly when contrasted to the potential expense of uninsured risk.
❖ Liability Limitation
If you are a sole owner, consider converting to a corporation or limited liability business to restrict your liability (LLC). The business owner is not personally accountable for the debts or other liabilities of the company under this structure.
❖ Establish a program of quality assurance
To build a sustainable business, a good reputation is essential. Customer service is critical to business success. Ensure that you test your products and services to ensure the best possible quality. By testing and assessing your offering, you may make appropriate improvements. Additionally, you should strongly consider going further and assessing your testing and analysis procedures.
❖ Restriction of High-Risk Customers
If you're just getting started, immediately set a policy requiring consumers with weak credit to pay in advance to avoid future issues. To accomplish this, you must have a process in place for identifying low credit risks well in advance.
❖ Maintain Growth
This is entirely related to staff training. If you sell items or services and set lofty targets for your staff, they may be encouraged to take unwarranted risks, resulting in a negative image of your business. Rather than that, teach your employees to prioritize quality above quantity. This way, you'll minimize the possibility of diminishing sales due to high-pressure sales practices that clients dislike.
On a similar point, while innovation is critical to success, excessive innovation can be detrimental. A glitch is unavoidable if your business is continually reliant on the next innovation for growth, as not all new goods and services succeed.
❖ Form a Risk Management Committee
If you want to avoid hiring an outside agency and have the time, you might appoint current staff to lead a risk management team. However, this might be prudent if someone on the team has experience in this area and is capable of acting as a leader.
Otherwise, hiring a third-party risk management company will be a sound investment. They will be able to identify all potential hazards to your business based on your industry and develop fast response measures if any of those risks materialize. This should result in the avoidance or reduction of certain risks and dangers.
Risk management is a sort of insurance in and of itself and is a necessary component of long-term success. Suresh Mansharamani The Business Coach in India advises these seven steps outlined above to assist you in developing a risk management strategy, but they are only a starting point. A thorough examination of your organization and industry will assist you in developing a risk management strategy that may save the business you worked so hard to build.
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