Business Planning Process Planning & Strategy

How to Identify Risks in Business

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Something that doesn’t get talked about nearly as much as it should is risk in business. There’s a risk in everything we do in life. So the concept of risk doesn’t really get thought of as something we should be actively monitoring. We acknowledge it, but we rarely consider the effort it takes to study it. In the world of business, planning and strategy are everything. Both of these things pave the way for our success. In truth, risk analysis encompasses everything. From considering the impact of losing half your workforce, to thinking of solutions for losing consumer confidence, risk covers all aspects of business. But you’re probably lost when it comes to risk management. The first step is to identify the risks, so here’s how.

Clear and Present Danger

Risk is not a clandestine art, it’s a simple mixture of philosophical understanding and statistical analysis. Essentially, it’s the study of human behavior in the world of business, trade and finance. To start identifying the risks in your own organization, look for clear and present danger. What part of your business is ‘exposed’? Do you have outstanding debt? Do the loan repayments you’re making to the bank cut out too much from your revenue each month? Is it sustainable to be paying your employees as much as you are? If your business were to take a financial hit this month or this year, could you manage to carry on as you are? If you take a moment to study your operations, you will find things that present a forthright problem. You know what you have to do. Mitigate these risks as soon as you can. You never know when the worst can happen.

Become a Pessimist

Just for one week, become a pessimist. See the bad in everything in your business. Think about the things that would become a grave matter, if they suddenly stopped working as they are. What if your supplier couldn’t deliver the agreed inventory or raw materials? What if your employees were sleeping with the enemy, giving away secrets to your competitors? What if you couldn’t fund project research initiatives? What if customers could no longer afford to pay the prices you demand? When you start to come to the conclusions for these questions, you will be slowly painting a picture of collapse and consequently, come to the realization that you need to prepare for these types of scenarios.

A Leak Somewhere

Of all the areas of risk management, the financial side is the most important. During the current situation, most businesses have shut up shop. They have no income coming in, so they need to do a bit of plumbing to stop financial leaks. Using QuickBooks Online Accounting Software, you can track and manage all your sales. Using the plus package, you can create sales quotes that are useful to understand whether or not it’s worth going ahead with a deal. Crucially, you’ll know where you’re losing the most amount of money, identifying the biggest risk to staying afloat.

Identifying the risks your business faces, is the first major hurdle, for better planning and strategy. Once you know the various dangers your business could experience, you will be in a better place to avoid them.

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