"Sense and manage problems in their smallest state, before they become bigger and turned out to be lethal."
- Reduce revenue leakage which supports an increase in revenue
- Improve stakeholder confidence and trust
- Increase the probability of achieving goals
Your business operates in highly uncertain environments. This
uncertainty brings a high level of risk to your company. Risk management is the identification, evaluation and
mitigation of potential risks that can have adverse effects on a business. Early
recognition and mitigation of risk is a critical factor for success in startups
businesses, as the cushion for absorbing failure is relatively low.
As per the survey, just
44% of small businesses stick around for four years or more. One main reason so
many go away is Poor risk management.
While it is essential to concentrate on the positive aspects
of your business, but it is foolish to overlook potential future risks that
might damage your company in the blink of an eye.
The Uncertainty factor
The risks can emerge from uncertainty about different parts
of the business, such as
1- There is no guarantee that customers
will like your products or services enough to purchase them.
2- Entrepreneurs frequently borrow money
to finance their venture in its earliest stages; there is a chance that they
will not make sufficient profits to be able to pay these loans back.
3- As a business grows, the founders
will have to delegate responsibility for certain tasks to employees whom they
do not know well. The employees bring uncertainty and risk related to their
skills and performance.
4- Entrepreneurs do not know the correct price for their product at the beginning; they may have to raise prices
or change their business model, running the risk of alienating customers.
5- Whenever a business ventures into a
new market or launches a new product line, there is risk involved with the
logistics and geography.
So it is necessary to secure your company against such risks
in order to ensure future success.
Assessing and Managing
Risks
1-Financial Risk
Running out of cash is often the endpoint in the life of any
business. Knowing where your cash is coming is important.
You also need to ask yourself some important questions like
what you would do if
1-The cost of your raw materials or suppliers could rise
suddenly.
2- Your biggest client went away or your most popular product
stopped selling overnight
3-A slowing economy could reduce the demand for your firm’s
product or service
While you can't anticipate all future risks, it is best to be
prepared against the ones you can predict. One way to minimize your financial
risk and give yourself a long runway is to take funding when it is available
and keeping it in reserve.
2-Market Risks
Market risks refer to finding answers of questions such as,
Is there a market for the product? How do you get customers? What about the
competition?
The simplest way for entrepreneurs to mitigate market risk is to
avoid perfection. When your product becomes good enough to make some customers
reasonably happy, get it into the market where it can start generating cash
flow and feedback.
3-Technology &
Operational Risks
Technology and operational risks broadly cover everything
having to do with execution, Can your team finalize the product design on a
limited R&D budget? Will your product work as intended? Can you find
reliable vendors? Can you manufacture it? Can you optimize the logistics of
product distribution?do you have a backup plan?
When it comes to execution, there’s no substitute for
experience. It’s all about careful planning and watchful management by people
who know what they’re doing.
4-People Risks
As your business grows and you delegate responsibility to
employees, part of the success of your venture will rest in their hands. The right combination of experience, contacts, and temperament among the founding
team can vastly increase a venture’s odds of success.
If you discover that a member of your team isn’t going to
work out, you need to fix it quickly before the situation gets worse.
5-Legal &
Regulatory Risks
No startup can succeed without legal advice. The list of
possible problems with legal or regulatory roots is almost endless, hiring an
accountant who will take care of your financial liabilities and protect your
assets will prove to be a boon in the future. Similarly, getting an attorney to
review your contracts and give you legal advice on day-to-day affairs is just
as important.
Summary
When you’re starting a company you already know you’ll have a fixed amount of investment upfront, so you know what the total cost of failure
would be.For entrepreneurs, anticipating risks and preparing for them can make
the difference between failure and success. The key is to quantify risks and
come up with some contingency measures
Having a proper risk management strategy prepare the business
as much as possible for all factors, known and unknown, that can hinder its
success in any way.
Address: Unit No.450, Mastermind One - IT Park, Royal Palms, Aarey Colony,
Goregaon(E), Mumbai, Maharashtra 400065
Phone: 08355979232, 09867806399
About Prakash Bhosale:-
Prof. Prakash Bhosale is the entrepreneurship consultant for startups. He is a serial IT, Media entrepreneur & leading business consultant He has Over 15 years of experience in education, corporate, IT, e-Marketing, Consulting domain. He is a columnist on business & entrepreneurship with newspaper, magazines, portals, published over 1100 articles. He is the writer of the 4 books on business, entrepreneurship, business ideas. He also guides PhD fellows, business plans, DPR preparation.
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Nice sir
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