Running a business takes hard work and while success – customers, revenue and satisfaction – is the ultimate goal, all businesses come with risks which could stop you from achieving your goals. That’s why business risk management is key to building confidence in both your internal and external stakeholders – people want to be assured that each business decision is properly vetted before being made, that losses are minimised and successes maximised. A robust business risk management plan puts in place procedures that can help you identify, pre-empt, and avoid potential threats – or at the very least minimise their impact. Here are seven types of business risk you may want to address in your company.
1- Economic Risk
The economy is constantly changing as the markets fluctuate. It’s important to watch changes and trends to identify and plan for an economic downturn. Some positive changes are good for the economy, which lead to booming purchase environments, while negative events can reduce sales. To counteract economic risk, save as much money as possible to maintain a steady cash flow. Also, operate with a lean budget with low overhead through all economic cycles as part of your business plan.
2- Compliance Risk
Business owners face an abundance of laws and regulations to comply with. For example, recent data protection and payment processing compliance could impact how you handle certain aspects of your operation. Staying well versed in applicable laws from federal agencies like the Occupational Safety and Health Administration (OSHA), the Environmental Protection Agency (EPA), and state and local agencies can help minimise compliance risks. If you rely on all your income from one or two clients, your financial risk could be significant if one or both no longer use your services. Start marketing your services to diversify your base so losing one won’t devastate your bottom line. Non-compliance may result in significant fines and penalties. Remain vigilant in tracking compliance by joining an industry organisation, regularly reviewing government agency information and seeking assistance from consultants specialising in compliance. For more on data compliance, read: “GDPR, Everything You Need to Know” and “GDPR: A 21st Century approach to Compliance.”
3- Security and Fraud Risk
As more customers use online and mobile channels to share personal data, there are also greater opportunities for hacking. News stories about data breaches, identity theft and payment fraud illustrate how this type of risk is growing for businesses. Not only does this risk impact trust and reputation, but a company is also financially liable for any data breaches or fraud. To achieve effective enterprise risk management, focus on security solutions, fraud detection tools and employee and customer education about how to detect any potential issues.
4- Financial Risk
This business risk may involve credit extended to customers or your company’s debt load. Interest rate fluctuations can also be a threat. Adjusting your business plan will help you avoid harming cash flow or creating an unexpected loss. Keep debt to a minimum and create a plan to start lowering that debt load as soon as possible. If you rely on all your income from one or two clients, your financial risk could be significant if one or both no longer use your services. Start marketing your services to diversify your base so losing one won’t devastate your bottom line.
5- 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. One negative tweet or bad review can decrease your customer following and cause revenue to plummet. To prepare for this risk, leverage reputation management strategies to regularly monitor what others say about the company online and offline. Be ready to respond to those comments and help address any concerns immediately. Keep quality top of mind to avoid lawsuits and product failures that can damage your company’s reputation.
6- Operational Risk
This business risk can happen internally, externally or involve a combination of factors. Something could unexpectedly happen that causes you to lose business continuity. That unexpected event could be a natural disaster or fire that damages or destroys your physical business. Or, it might involve a server outage caused by technical problems, people, or a power cut. Many operational risks are also people-related. An employee might make mistakes that cost time and money. Learn more about the” Top Risk Management Concerns and The Need for Leadership During COVID-19.”
Whether a people or process failure, these operational risks can adversely impact your business in terms of money, time and reputation. Address these potential operational risks through training and a business continuity plan. Both tactics provide a way to think about what could go wrong and establish a backup system or proactive measures to ensure operations aren’t affected. Investigative operations (via commercial investigations) focus on the current status of your business – i.e. location of assets, financial information, identification of unmet needs of any market, gauge brand awareness and identity in the market, etc.) For example, more businesses are using cloud storage to protect company data and rely on remote team members to maintain operations. Automating more processes also helps to reduce people’s failures. Learn more about it HERE!
7- Competition (or Comfort) Risk
While a business may be aware that there is always some competition in their industry, it’s easy to miss out on what businesses offer that may appeal to your customers. In this case, the business risk involves a company leader becoming so comfortable with their success and the status quo that they don’t look for ways to pivot or make continual improvements. The increasing competition combined with an unwillingness to change may result in a loss of customers. Enterprise risk management means a company must continually reassess their performance, refine its strategy, and maintain strong, interactive relationships with its audience and customers. Additionally, it’s important to keep an eye on the competition by regularly researching how they use online and social media channels.
Business Intelligence is most effective when it combines data derived from the market in which your business operates (external) with data from within, such as financial and operations data (internal). When combined, this data can provide a complete picture so that you can make any business decision, from operational to strategic, such as product positioning or pricing. Learn more about it HERE!
Accept, But Plan
Although you will never be able to eliminate business risk, proactively planning for it can help. Awareness is key in helping you save money and time while protecting the trust, reputation, and customer base you’ve worked so hard to achieve.
Who is CRI® Group?
Based in London, CRI® Group works with companies across the Americas, Europe, Africa, Middle East and Asia-Pacific as a one-stop international Risk Management, Employee Background Screening, Business Intelligence, Due Diligence, Compliance Solutions and other professional Investigative Research solutions provider. We have the largest proprietary network of background-screening analysts and investigators across the Middle East and Asia. Our global presence ensures that no matter how international your operations are, we have the network needed to provide you with all you need, wherever you happen to be. CRI® Group also holds BS 102000:2013 and BS 7858:2012 Certifications and is an HRO-certified provider and partner with Oracle.