Business risk is a huge subject that covers many different things. It can apply to small businesses, larger corporations, or even freelancers working for themselves. Business risk can be something that has to be managed internally, but it can also cover the partnerships you have with other businesses. It could also be related to the global economy, but it could be limited to your local area as well if you’re a retail store.
It can be difficult to identify all of the different types of risksthat you might face as a business, so here are a couple of common things to look out for and how you can overcome them.
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Compliance risk
Businesses need to be regulated in order to keep them from doing anything shady or illegal to gain an advantage over their competitors. Compliance risk is also important for ensuring that customers aren’t treated poorly by large corporations. A good example of this would be getting on a LEI partner program. If you’re a financial entity that makes a number of large transactions in trading markets, then you need to have a LEI in order to provide more transparency.
Compliance can also apply to your staff and working conditions. For example, if your employees work in relatively dangerous conditions then you need to establish safety practices to ensure that they are protected. You may need to work with federal agencies like the Occupational Safety and Health Administration (OSHA) to minimize these compliance risks. If you fail to do this, then it may result in high fines, penalties, and other problems that could drag your business down.
Another aspect where compliance may come into play is if you hold sensitive information about your customers, patients, or even your staff members. Any sensitive information should be locked well away, but if someone gains access to your premises by accident, this could be detrimental to your company. Installing security systems and access-only doorways with the need of an RFID tag will help you prevent this.
Failing to meet these regulations and standards can also lead to a poor reputation among workers. This can demotivate your employees and will make it hard for you to find new talent. This will make your business stagnant and there’s a very small chance that you’ll be able to become a relevant business again.
Reputation risk
Speaking of reputation, there are also a number of risks associated with how your brand is viewed in the eyes of the public. Whether it’s a bad product launch, poor customer service, or even trouble with the law due to bad business practices, these are the types of things that can negatively affect your business reputation and put you in a really bad situation.
The best way to prepare for these types of risks is to use some form of reputation management strategy. This can mean having a great social media team to help ease the concerns of your audience, but it can also mean assessing risk before things get out of hand. You can easily avoid lawsuits and complaints if you are proactive about addressing problems before they become a huge issue.
It’s also a good idea to be as transparent as possible when communicating with your audience. Admitting that you made a mistake is a lot better than trying to shift the blame onto consumers or your partners. Not only does it help you assume responsibility, but it shows your customers that you’re willing to go the extra mile in order to protect your reputation and provide fantastic customer service. This will help improve your reputation while also protecting it from further damage should you be faced with adversity.
Economic risk
No amount of business planning can help you overcome economic difficulties. Markets can fluctuate a lot and there’s no telling what might happen to your company in a few years’ time. The products you make and sell could gain a bad reputation due to unfortunate circumstances, and trends may drastically change which results in poor sales for the entire year. These kinds of circumstances are hard to overcome and you can’t exactly plan around them. For instance, you can’t just make another product as a backup plan or sell different services to make up for lost sales. However, what you can do is minimize the impact of these risks.
There are a handful of ways to do this. One option is to save as much money as possible. This ensures that you have emergency reserves which can be used to keep your business afloat during bad times. Since you may need to pay many employees and keep up with production, this can involve a lot of money. It’s best to get a rough idea of how much money you need to keep your business running during difficult economic circumstances. It may also help to seek financial aid if times are really bad.