Tips for Managing Risk within your Business Venture

Most often, entrepreneurs and other small business owners think that only large businesses and multi-national corporations should be concerned about the subject of risk management. However, this is a very wrong notion as the impact of a risk exposure can be more fatal to smaller businesses than large ones. Remember that the large businesses have deeper pockets and can afford to write off big amounts as “extraordinary occurrences”.

This week, I wish to share simple tips that can aid with the management of risks faced by small businesses. Generally, risk management refers to the practice of identifying, understanding and mitigating occurrences that can prevent the achievement of business objectives. Thus, the most important thing is to have a clear understanding of what risks your business might face.

Understanding the Risks in your Business

On a general note the key risks faced by most businesses (regardless of size) include operational risks, credit risks, reputational risk and market risk. At a more specific level, this can include employee medical risk, IT risk, travel risks etc. The key to this understanding is to review all possible areas and identify the things that can affect business objectives. This process is referred to risk identification and assessment in the corporate world. “Assessment”, is used here because the business process owners usually go on to assess the identified risk in terms of its possible impact and likelihood of occurrence.

Simple Risk Assessment for Small Businesses

To achieve this in a small business setting, it would help to sit with your overall team, even the janitors and doormen in your employ and go through a structured way to identify all possible risks. Remember, during this process, no risk identified is stupid. After taking down all the possible risks, you can then rate it on a scale of 1-10 via voting to determine the risk impact and its likelihood. Naturally, the high risks will be at the top and vice-versa for the low risks.

Designing Mitigation Strategies

After identification and assessment, the next thing will be to decide which risks (usually the top 5, 10 or 20) to focus on. You cannot focus on all risks and should structure the mitigation process in a way such that the effort to be put in will not be more than the benefits to be derived. This is very key. All members of the team can contribute to suggestions for the mitigation strategies. Though, it is usually helpful if you get an external consultant at this stage, because they are independent and can come up with different and better ways of managing your business risks.

We will be glad to hear your feedback on how this helps and give your further suggestions at a more specific and personal level if you desire.

Advertisements

Setting the Right Priorities for Your Business Venture in 2012

A new year is upon us again and this seems to be a busy time for most 9japreneurs. Usually, the beginning of a new year is viewed as a fresh start and a time of new possibilities. Most business owners will be busy re-strategizing and seeking the best way to move their business forward. However, if things are not properly managed at this time you might get overwhelmed and burnout before you know it, especially if your business is still in the boot-strapping phase.

We have highlighted below some great tips you can use to prevent this burn out and achieve maximum value from your effort by setting the right priorities.

1. Understand the direction for your business

The very first thing is to understand what you intend to achieve in this year. Basically, this will involve taking a look at how things fared in the past year, what you did right and wrong, a full fledged market analysis, competitor evaluation and opportunities for growth. There is so much to do in this regard.

My advice is that you focus on the top five internal and external factors that can affect your business while trying to better understand the direction for the year. This way, you can then narrow down to the actual goals and objectives for your venture in 2012.

2. Write down your goals and set realistic targets with timelines

Ensure that your goals for the year are written down, critiqued (by yourself and others) and refined to ensure that all possible areas have been covered. Then, you should set realistic targets and timelines for the achievement of these goals within the year.

Even if these goals are a carry-over from the last year, make sure they are written down so that you will not lose focus on any one.

3. Involve your team and delegate appropriately

If you have the luxury of a good team within your employ, the best you can do is to get them to participate fully in strategic activities as the year begins. Even though you have your vision for the company clearly set out, it is usually more rewarding if you seek their opinions or buy-in on the way forward. This way, they feel more respected within the company and will probably perform better on the tasks assigned if they were part of the formulation. Remember that “our budget” is always preferred than “my budget”, “his budget” or “her budget”.

In our usual manner and for the sake of practicability, we would love that you start out with these three tips and see how well it is helping you move forward as a 9japreneur. We would love feedback from you and also willing to help with any challenges you are facing as a business as the year begins.