5 Ways To Successfully Manage Business Risk
Running a business or managing a Department always brings with it the skill of managing Risk: we cannot get things right every time nor can we look into the future to see what is coming around the corner.
What we can do however is to recognise that Risks present themselves under a number of headings and we can then tackle these challenges carefully and systematically.
Risks can be broken down into 5 separate types, all with their own features and strategies needed to minimise them.
- Strategic Risks: we all need a carefully considered and thought-out Business plan which will chart out the path we intend to take. Whilst this is a very sensible method we MUST recognise that this is not a straightjacket and that change will force us to alter our plans. Only a foolish business or Manager would constrain themselves in a rigid plan that is clearly out of alignment with their strategic and operational needs.
- Compliance Risks: legal requirements change all of the time and are part of the process of continual refinement and adaptation of the law in regulating business. Potentially exporting goods is always problematic and the option chosen by many businesses to expand their product line can lead to many different, unthought-of compliance issues that never featured at the design stage of the expansion.
- Operational Risks: the internal risks faced by producing the product or providing the service under examination. These risks are often examples of “people” failures (training or poor control and monitoring of performance) or “process” failures (where systems are not robust enough to deliver what is needed). Costs of fixing the problem, however it has occurred and however failure is defined, can be very limiting upon growth and development.
- Financial Risks: do we have sufficient funds to manage the business, is cash flow managed well and consistently, is our customer base too heavily weighted to a small number of important and influential clients and are we carrying too much debt?
- Reputational Risk: reputation is everything in business and once gained needs to be managed very carefully. Once Reputation is lost it is very hard to gain back again. Poor management of Reputation leads to demotivated staff, recruiting the right staff becomes much harder, legal challenges are very costly and damaging and turnover directly suffers. Many businesses now find themselves cut down by the power of social media and the power of thousands of tweets circulating in the system.
Good and consistent Risk Management is the key to success especially in a crowded and competitive marketplace.
For more details of our services visit the website www.davidsummertonconsulting.co.uk