How to Reduce Your Risk Factors

 

Risk factors often make headlines. Whether it's a deadly Ebola outbreak, a volatile stock collapse, or a product recall that makes you wonder what your lawyer isn't telling you. However, your everyday business often involves hundreds of different risk factors, which can be troublesome and difficult to keep track of. But fear not. Volonte Business Management Solutions UAE will teach you the ins and outs of risk management so you can implement your own approach to managing risks in your business. Because regardless of what topic you're an expert on, one thing is certain: there are no experts on avoiding all possible risks.

Perform a risk analysis

Regardless of the size of your business, you need to perform a risk analysis. A risk analysis is a process to identify potential issues that may negatively impact your business and then determine how to best reduce or eliminate those risks.

To start, take an inventory of everything that might pose a threat to your business. This could be anything from natural disasters to equipment failure and even employee theft. Go through each area of your business and make a list of all threats, big and small, external and internal.

Then determine what you can do to minimize each risk. For example, if one of your risks is running out of cash flow, you might decide to add a line of credit. Or if one of the risks is having equipment breakdowns, you might decide to have an emergency fund set aside for repairs or replacements. The more risks you can reduce or eliminate before they occur, the better off your business will be in the long run. At this stage, you may hire dependable market research companies in Dubai that will provide you with information on external and internal risks in your business and its environments.

Focus on “high-priority” risks

The next  step in risk mitigation is to determine which risks are the most imminent and which ones would do the most damage if they occurred. To be useful, this list needs to be prioritized so that your resources can focus on mitigating the most severe risks first.

There are a number of ways for prioritizing risks. One is to look at the consequences and likelihood of each risk. The classic risk matrix uses a four-square diagram to map these two factors.

In one square, you have “rare” and “trivial,” which means the event is unlikely and not important if it happens. In the opposite square, you have “common” and “catastrophic,” meaning a serious event that will happen repeatedly.

The other two squares have some combination of serious consequences and low likelihood (“severe”) or high likelihood but relatively minor consequences (“annoying'').

Once you’ve put each risk into one of the four squares, you can prioritize them by looking at which ones are in the upper right corner — i.e., serious consequences and common occurrence — and work down from there.

Identify Controls

There are three broad categories: operational, financial and strategic or reputational risks. Operational risks cover all aspects of running the business, including production, sales, marketing and personnel. These are the most visible risks because these activities affect your customers directly. Financial and strategic risks relate to the long-term success of your company; they include such factors as competition and financial performance.

Establish control measures

As you review the risks and identify controls, you will want to be very specific in your instructions. Make sure that everyone understands how to implement each new control and who is responsible for doing so. Include a timetable for implementing the controls, as well as a requirement to report back when they are complete.

The more specific you can be with your instructions and time requirements, the better. Remember: People don't like change and there will undoubtedly be some resistance to putting your plan into action. Providing clear instructions that are easy to follow will help overcome any reluctance or confusion about what needs to happen next.

Don't forget to schedule regular meetings for monitoring the risk management plan and reporting on progress. This will give you an opportunity to see what is working, make adjustments if necessary, and congratulate your team on their efforts. You can work with a business management consultancy in Dubai that will help you in monitoring and finding solutions of managing the effects of the risk.

Stay flexible and adaptable

One thing that can hinder your business is an unwillingness to change, the ability to pivot, or change directions when needed, will be key in reducing these risks. If you aren’t able to adapt to changing market conditions, then you run the risk of being left behind by your competitors. This is why it’s important to have a clear vision of where you want your company to go and how you want it to grow, but also be prepared to adapt if the market changes or if you learn something new about how customers want their needs met.

One of the great things about this article is that it reminds us to consider the big picture. It takes a step back and looks at our actions and behaviors on a macro level, instead of micromanaging day-to-day tasks. It's easy to get wrapped up in the day-to-day minutiae of running a business, but if you can manage your risk factors, you'll be set up well for long-term success.