Starting a new business is often the most significant risk one can take. There are so many risks to consider as you look to find your feet and establish who you are and what you stand for. It may be tempting to remain positive and ignore the risks, but the truth is, you need to know how to handle them if they occur.
While the chance of your business going bankrupt may seem unlikely, it is wise to have a solid financial plan in place that details procedures for managing debt. A well thought-out plan is just one example of the functionality of a Risk Management strategy, something every company needs, especially start-ups.
Understanding the risks
While risks can vary from industry and sector, some risks apply across the board. Once you have an understanding of these risks and the potential damage they can cause, you can set about establishing your Risk Assessment Plan to ensure the safety of your new business.
Market Risks – Every market has its risks which refer to whether or not there is sufficient demand for what you have to offer at the price you have set. Take into account your competition and consider what you’re offering and how you can provide a better service than your counterparts.
Technology & Operational Risks – While technological risks may apply in some sectors more than others, ensuring that your equipment is sound and making sure your data is protected and accessible is a vital component of a risk management strategy.
Financial Risks – Setting up a business is the first major financial risk you take, but it doesn’t stop there. Paying for equipment, staff, property as well as insurance follows and at times it may seem like your pockets are getting shorter. Tightening the belt can help get your business off the ground.
People Risks – Surrounding yourself with the right kind of people can significantly help your business to flourish. Surrounding yourself with the wrong people can damage your prospects, indefinitely.
Pragmatic Risk Management
The best way to combat these risks and prevent them from happening while preparing for the worst possible outcome is to sit down and plan out your Risk Management strategy by following these steps:
Assess how likely or unlikely each risk is. Equate through high risk, medium, and low potential.
Consider the consequences of a risk manifesting itself.
Identify what you would do in the event of a risk manifesting itself. Prepare your strategy based on the above recommendations.
Finalize what you have considered and prepare your Risk Management Strategy based on an evaluation of cost and potential damage.
Setting up a business can be difficult in more ways than one. With so much to consider, it’s essential that you are aware of the factors to review and consult your insurance agent to set about preparing for these obstacles. With a clear head, an appetite for success and an awareness of the risks, your start-up will prove successful.