Risk is generally an exposure to danger to your bottom line. When you are in business, you need to consider the kinds of events that could pose a risk to your business and take steps to mitigate them. Understanding how these risks apply to your business and proactively managing them will help you sustain growth. Generally, the risk factors are more prevalent in younger companies with higher growth rates and less prevalent in mature companies with lower growth rates. Here are the 5 commonly prevalent risks;
- Process Risk
The business risks associated with a particular process. Processes tend to be a focus of risk management as reducing risks in core business processes can often yield cost reductions and improved revenue.
Most growing companies are so focused on their ability to produce now that they spend little effort on building the operational infrastructure to sustain their growth over time.
- Quality Risk
The potential that you will fail to meet your quality goals for your products, services and business practices.
This risk factor is generally a direct result of not managing process risk. It is a result of prolonged lack of attention to operational infrastructure, but its negative impact on a business is immediate. In essence, customer needs get obscured by the need to expand and sell more.
Educate your employee that it is five times more expensive to acquire a new customer than it is to sell more to an existing customer.
- Innovation Risk
Risk that applies to innovative areas of your business such as product research. Such areas may require adapting your risk management practices to fast pace and relatively high risk activities.
- Project Risk
The risks associated with a project. Risk management of projects is a relatively mature discipline that is enshrined in major project management methodologies.
- Reputational Risk
Reputational risk is the chance of losses due to a declining reputation as a result of practices or incidents that are perceived as dishonest, disrespectful or incompetent. The term tends to be used to describe the risk of a serious loss of confidence in an organization rather than a minor decline in reputation.