HOW TO MANAGE BUSINESS RISKS
As we already know a business risk to be an event that occurs and may have a negative effect on our business. No one prays for the worst to happen, but in as much as we are positive and optimistic about our business, we can’t turn a blind eye to the fact that risks exist and our businesses are faced with such risk daily.
Risks are not that bad and may not pose a problem to your business, except if they are not managed properly, then that might result in a great loss to any business.
Business risks can be managed in the following ways;
1. MITIGATE THE RISK – To mitigate a risk is to reduce the impact of a risk so that peradventure the risk occurs you are able to control it, easily fix it or reduce the problem the risk would have created if it was not attended to. In mitigating a risk, you are simply setting up a kind of optional plan, a kind of plan B to fall back on so that if the risky situation occurs, you are not greatly affected.
2. AVOID THE RISK – As a business owner, you can decide to totally avoid the risk, in this case, mitigating the risk may not be required. A risk is preferred to be avoided if its impact is high and is likely to disrupt business activities.
3. TRANSFER THE RISK – For risk transference, the risk is transferred to someone else to bear. This particular risk management process is not used often, it is mostly used when there is a third party involved. Here, the impact and the management of the risk is transferred to someone else. Insurance is one major way that risk is transferred, the insured is free from any loss that may occur and the insurance company bears the burden if such risk occurs.
4. ACCEPT THE RISK – There are some risks that having studied and evaluated, you can’t just seem to avoid or transfer. In such a case you have no choice but to accept the risk. Accepting the risk is not without proper observation and search for better options. But having searched for it, and finding no better option, you just may be forced to accept it. Accepting risks works best with risks that have smaller or little impacts which can be handled, in some cases, the risk may not occur.
5. EXPLOIT THE RISK – When a risk has negative consequences, one may decide to transfer, mitigate or avoid it. But a risk may have a positive impact, it won’t always be negative for businesses. What then do you do in such a situation? You exploit it, as this is a risk that would be beneficial to the business. You don’t look for ways to avoid it or transfer it.
For a risk with a likely positive impact, ways are sought to make it happen or even increase the impact of such.
When these business risk management strategies are known and understood they can help businesses make the right choices as they are faced with business risks.
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