Risk is as old as man and has been an old acquaintance of business. However, there is no approach that makes risk extinct in the business environment; can be controlled to an appreciable level. As an entrepreneur, you have a duty to reduce your level of risk to the minimum possible if you can continue to make a profit. To this end, better risk management strategies are good inhibitors of business failures.
No matter what the sizes are, companies need to have a risk management approach as they can be easily managed when identified. To protect a business against risk, an entrepreneur must do the following:
1. Stop activities associated with risk: Activities that create risk for an organization must be stopped. For example, if you don’t separate a business fund from a personal fund, there will always be a temptation to use the business fund for personal expenses. More often than not, quick and one-sided decisions by top management members pose huge risks to the company.
2. Spread the risk: Risk doesn’t need to be concentrated on your desk. Spreading the risks in the form of subcontracting some projects/services with a performance guarantee signed by the contracted company can help. Sometimes selling products on credit to trusted customers can help minimize the risk of obsolescence and high inventory cost.
3. Reduce risk through better management control: If the pros and cons of running an organization are properly explained to the management staff, employees, and customers, etc., certain risks in the business will be avoided. The correct management of company data also helps prevent risks. Printed data can be digitized and stored by accredited data administrators for security.
4. Insure against risks if possible: A company needs to insure against damage caused by fires and natural disasters.
5. Apply improved technology: if risks are avoided, modern techniques will be applied in the operation and provision of services of any company. This will improve business supply chain management and thus make service delivery excellent.
Managing some aspects of our business against risk requires automation. This will eliminate a great deal of human error associated with risk. In order to reduce risks in planning, monitoring and evaluation, IT tools will be a true instrument.
