Forms of business risks and practical ways to manage them
Business risks are the potential dangers that a business company may encounter if preventive measures or safety precautions are not put in place to avoid them. When a company experiences a particular business risk, the entrepreneur should not point the finger at witches, ghosts or enemies. They occur as a result of poor planning and a lack of measures to manage these risks. There are two main types of risks that a business enterprise is likely to face.
These are direct and indirect risks.
1. Direct Risks – This is a type of business risk that could completely collapse a business venture. They directly affect the company and stop all its business activities. Due to the seriousness of direct risks, entrepreneurs must establish preventive measures to reduce them. Examples of direct risks include theft, fire, bankruptcy, misuse of capital through irresponsible spending, etc.
2. Indirect risks: this type of business risk slowly causes the company to collapse. If you are not very careful, you can hide from the entrepreneurs. Like a slow poison, indirect risks if left unchecked can ruin a business venture. They are quite difficult to control and account for a larger share of business losses. Examples of indirect risks are lack of sales due to defective or poor quality products, incorrect business locations, currency inflation, introduction of new taxes, changes in labor laws, etc.
Business risks, whether direct or indirect, can be managed or controlled. The employer must be very attentive and alert in his supervisory role. There should be a regular or routine check of stocks and finished products. Only the entrepreneur cannot do this job. An accountant or bookkeeper should be hired and assigned to check the company’s accounts every month or even daily, depending on the size of the company or the rate of purchase of products.
In addition, the employer has to increase vigilance and security by conveying security, such as the employment of security personnel and the installation of security devices. These measures would help minimize or completely stop theft incidents.
Most business fires are the result of faulty electrical connections and appliances. The employer must hire a qualified electrician to perform all electrical connections or wiring for the business. You have to replace all weak or defective cables and other electrical appliances to avoid the possibility of a fire.
Low sales and patronage of a company’s products can be due to several factors. Chief among them is due to the low-quality nature of the products and the wrong business location. The entrepreneur must train his staff members while constantly checking the quality of the product. You have to use quality and durable materials to make your products. Also, if the wrong location of the company is causing the drop in product sales, the entrepreneur should move the company to a more promising area where there would be a lot of sponsorship for its products.
Inflation and constant changes in labor laws can affect the success of a business enterprise. An entrepreneur must always be alert to these changes. You can do this by keeping in touch with the relevant ministries to find out what new changes have been planned that may affect one’s business.
It takes a lot of time and effort for entrepreneurs to start businesses. Because of this, they must guard themselves carefully against any internal or external danger that may result in their collapse. Identifying and controlling potential threats to businesses is the guaranteed way to succeed.