Are you looking for adventure? Do you want to feel the adrenaline rush? You would indeed not find it in a roadside park. You can, however, find it on a high Himalayan Mountain. However, the risk involved in mountain climbing is exponentially higher than just sitting on a bench in a roadside park. Well, has anyone ever achieved great things without standing up to intimidating risks?
Similarly, your business can indeed operate in safe territory with minimum risks. But, it would certainly not reach its true potential. Therefore, you must take calculated risks to tap the actual potential of your business and expand its reach in the market. Drew Houston, Ben Silbermann, Travis Kalanick, and Larry Ellison are all those people who faced rejection for their ideas initially. Yet, despite opposition, they took the risk and entered the market. Now we all know their marvels as Dropbox, Pinterest, Uber, and Oracle.
The real key to success is not avoiding risk but managing it. Especially in the contemporary business world, the markets are so precarious. You don’t know what happens the very next moment. Therefore, you must plan your contingency strategies. It would help if you had your risk management plan to safeguard your business against external or internal shocks.
If you have been trying to cushion your business against risk, this article can help you. It mentions four risk management strategies for businesses.
Have a dedicated team for risk management
Like every other business function, risk management requires special attention. You must have a well-trained and academically sound in-house risk management team. You can train employees internally through AACSB online MBA no GMAT, with a focus on risk management. Such online learning options will allow them to juggle work and studies simultaneously. The recent hike in the enrolments for risk management specialization makes its importance evident. More and more organizations are now developing professional teams for looking after the market and gauging risks. It is how they prepare themselves for tackling it on time with concrete measures.
Currently, only 36% of global organizations have a dedicated risk management program. However, all the leading and successful organizations are among this 36%. Understanding the market across different business domains has become more critical than ever before. Financial risk, market collapse, labor market risk, and even internal administrative risk pose significant challenges for a modern-day organization. The complexities urge the need for a professional risk management team.
Make use of Data Analytics
Data analytics is the science of transforming raw data into useable data series. Companies can then use this nourished data to make informed decisions and understand the market’s dynamics and trends. Therefore, it can serve a huge purpose in risk management. Data analytics can provide real-time data analysis with precision radically more than manual forecasting. Therefore, risk managers can utilize this data for devising their strategies to tackle different risks.
According to a survey by Deloitte, 55% of organizations believe that analysis done through data analytics provides better insights for risk management. It helps you minimize repetitive losses. Data analytics timely raises red flags based on previous data trends and prevents you from attempting the same mistakes again. Your business might fall victim to the same risk that you have faced before. It might occur in a different appearance but pose the same challenge. Besides, you may oversee such loopholes, but data analytics can pinpoint such subtleties.
Opt for the proper corporation structure
History tells us that when a business gets stuck in hot waters, the C-suite executives are the first to run away. Many times, the owners abandon ship, fearing financial loss. The point here is to keep business separate from your financial position. It is safe for your business as well as for your financial health. You must opt for the proper corporate structure to manage liability and ensure minimal risk for both your business and you.
You might enjoy the autonomy and power of being the sole proprietor of your business, but it poses a huge risk too. You are answerable for all the financial standpoints of your business, either bad or good. In a sole proprietorship, you are personally liable for whatever debts and obligations your business has. Therefore, you should ideally shift to a Limited Liability Company (LLC). An LLC provides you a more formal partnership-type business structure with no personal liability for business debt. It reduces the risk of financial loss for you as well as for your business.
Ensure strong risk monitoring
Monitoring progress is essential for tweaking your business strategy accordingly. Monitoring your competition is equally crucial for the same purpose. Similarly, overlooking risk in the market serves a pivotal purpose for chalking down your risk management strategy. The most critical step in risk mitigation is identifying it at the right time. Proper risk monitoring systems enable you to discern potential risk and threats timely.
According to the State of Risk Oversight, only 40% of organizations were happy with their risk monitoring systems. They felt that they could enhance their risk management if they made their risk monitoring better. Large-scale organizations like Apple, Microsoft, Amazon, and Ford have shown remarkable resilience to market forces. It is mainly because their risk monitoring mechanism was powerful. They could timely identify, assess, and mitigate risk in a better manner than their competition. In addition, we also have examples of once-great companies like Nokia, Kodak, and Blackberry, who significantly lost their market shares. That is because they failed to monitor market risk timely.
It takes years to mature business and just a blink of an eye to lose everything. A single lethal market blow can crumble your entire business machinery. Undoubtedly, risks are always there. You can never rule it out of your business operations. You might avoid it in one function, but it will always be waiting for you in the other one. Therefore, you must incorporate the right risk management strategy into your business plan. It is the only way to ensure long-term viability and profitability for your business.