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How to Successfully Manage Risk

 

Keywords: risk management, business, decision, financial, employee, safety, intellectual property
 

Risk management is an important element of strategic management of any company, no matter the size. However, majority of small businesses do not realize the significance of developing a good risk management strategy. Every decision that you as a business owner make has some risk attached to it, and risk management helps you identify the risk and have a back up plane in place. There are certain risks that we cannot predict or control, while others we can, and your business needs to be prepared for those “predictable surprises”. Being an entrepreneur or a small business person stands for being a risk taker meaning that they perceive risk differently than other people. Here it is important to mention that there is a distinction between good and bad risk, and a well thought out risk management strategy ensures you separate the good from the bad.


With every action you take in business there is a probability it will have either good or bad impact on your objectives. The goal of risk management is to identify what events can negatively reflect on your business and minimize them as much as possible, and on the other hand maximize the ones that can impact your business positively. No matter if you are a risk taker by nature or you tend to avoid risk, be sure to evaluate the cost-benefit of every risk before making a final decision.


As a business owner you need to know what kind of risks your company is subjected to. Risk is driven both by internal and external factors. One of the major external risks is a strategic risk which includes competition, customer needs and demands, and changes in the industry. Operational risks include government regulations, culture, suppliers, contracts, etc. Next is financial risk which amongst other things include interest rates and credit. And last but not the least, hazard risks or natural disasters. Internal risk drivers are also numerous, and they range from strategic risks such as intellectual property, financial risks such as cash flow, to hazard risks that include safety of your employees and equipment. So you should be careful since this kind of risk may endanger your small business financing. Being aware of all these risk drivers the next thing to do is to evaluate your risks.


By evaluating risk you can determine how important each risk is, and according to that you can make an informed decision whether to accept that risk or find ways to avoid it. There are various tools you can use for analyzing risk, such as market surveys, auditing and inspection, business process analysis, brainstorming, and so forth. When you identify the risks, see how those risks can impact your business and than establish systems that will deal with the consequences of the risk.


Transferring the risk through insurance is the most common way of dealing with risk. Besides the standard health and life insurance, you should look at the types of liability and property insurance you may need, and also specialized insurance for particular risks in your business. Risk management is an ongoing process that involves allot of effort and it can improve the success of your business.
 


Source:http://www.articlesbase.com/strategic-planning-articles/how-to-successfully-manage-risk-1536959.html



 


 

 

 

 

 

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