Too many unexpected events can jeopardize the business. Entrepreneurs spend a lot of time worrying about different potential risks rather than undertaking activities to avoid such risks or neutralize them.
It is dangerous not to have knowledge on what could go wrong: will there be enough money, does the competitor have the resources and motivation to squeeze you out of the market, is the new product viable, what are all the dangers that a new market brings … or internally: what if my key sales manager leaves the company?
Most entrepreneurs have such a narrowed vision of possible ‘rescue actions’ which keeps them in a constant state of stress. Fortunately, in understanding the risk, stress decreases significantly, and opens the way to pro-active decisions and actions. Therefore, it is advisable to list the risks that may occur now or in the future, formalize them in document form, and anticipate activities in order to decrease, avoid, or neutralize them.
Risk management is a difficult and demanding job. The analysis of business risks is an integral part of the planning process, and the procedure includes:
Identifying existing and future risks connected to the business,
Incorporating significant risks into business plans while testing the assumptions of the plan,
An action plan to avoid the occurrence of events i.e. assessment of alternative scenarios and approaches to damage control,
Identifying the problem while it can still be controlled,
Both business risks and the concerns of the entrepreneur are unavoidable. However, it is possible to establish a framework of measures and behaviors which will reduce risk exposure and put the focus back on the business operations.