Success in business (and in life) often rests on the effective mitigation of risk. But how might a business approach the problem of risk, and what strategies are worth pursuing? Let’s consider a few of them.
Understanding the Types of Business Risks
Risk, for business, comes in several distinct varieties. There are financial risks, which might take the form of a bad investment. There are operational risks, like an essential piece of machinery breaking down. There are reputational risks, which might result from public embarrassment. There are also legal risks, which often result from a lack of compliance with the appropriate regulations.
Each kind of risk requires a slightly different approach.
Implementing Strong Financial Controls
If you don’t have control over your finances, then your business is unlikely to succeed. By putting in place systems for managing cash flow, forecasting expenditure, and budgeting for specific projects, you can limit waste. Regular audits, the right software, and technical expertise can all be extremely helpful.
Ensuring Legal Compliance and Regulatory Adherence
Modern business is faced with a raft of regulations and legal obligations. You’ll need to ensure that you’re on the right side of employment law, and that you’re meeting your duty of care when it comes to the health and safety of your employees. If you’re handling consumer data, then you’ll also need to be aware of the Data Protection Act (this being an implementation of the widely-publicised GDPR).
Failing to adhere to professional standards can expose your business to claims of professional negligence, which can severely impact your finances and reputation. But, perhaps even more significantly, it could result in reputational damage.
Building a Strong Risk Management Framework
To stand a good chance of avoiding risk, you’ll need to become aware of them. The best way to do this is through a formalised process of risk assessment. This should involve conducting the assessment in a specific way, at specific intervals, and acting on its findings by developing a range of contingency plans. The more proactive you are when it comes to seeking risk, the less likely you are to be tripped up by it.
Cybersecurity: Protecting Your Business in the Digital Age
Among the more significant forms of risk faced by modern businesses are those that arrive digitally. Cybersecurity should therefore be a paramount concern. Firewalls, encryption, and software updates will help you to protect sensitive servers – but eliminating human error, through education and training, will make you more resilient to phishing attacks, too.
Insurance and Safeguarding Your Assets
Business insurance comes in many different kinds. Public liability insurance, for example, will protect you against claims made by the general public. Other forms of insurance address more specific problems, like vehicle maintenance or cyber-attacks.
Through insurance, you can make your spending on these problems more predictable and consistent, and make your business more resilient to sudden disasters.