3 Ways to Handle Business Risks by Vic Di Criscio

When you begin, you may not think about business vulnerabilities so much. The big companies have to face bigger challenges, and that’s why you can feel safer. But assessing and managing risks from early on is critical. Many first-time entrepreneurs don’t make any plans for risk mitigation and management, which often becomes the main reason for their failure or slow growth. So, don’t make this mistake. You have to be on your guard from the inception of your company. Or, more precisely, it should become your focus even before you start hiring talents. Here are some insights on this.

  1. Extensive analysis of all types of potential risks

Managing risks requires innovative and creative thinking. You need the vision to be able to anticipate what can go wrong even before it occurs. Of course, it is not a simple undertaking. Otherwise, everyone would have tackled them. If you look at the data of about 1,100 global companies, you will find most of them spend only 9% of their efforts on risk management. Only 6% of them feel they manage risks well.

Nevertheless, the fact is risk management needs a creative and critical approach. Find out startups that faced disasters in their verticals. If you cannot eliminate them in the context of your business totally, you would want to examine and rank them, says Vic Di Criscio.

  • Cost calculation of the risks

You can categorize your risks based on their cost, chances of business loss, and others. Since it is impossible to tackle all of them together, you need to prioritize well. For example, you can imagine the loss of income if your business becomes inoperable due to power outages. While doing this, you cannot focus on situations associated with higher bills as it would not reveal the actual loss of income. It would be best if you considered both possibilities and probabilities.

  • Removal of the risks

Suppose your business allows car owners to lease out their vehicles—you tie up with an insurance company for theft protection. But when theft increases with time from 1% to 2%, the insurer may stop working with you or ask for higher premiums. As a consequence, you cannot say that the risk has wholly vanished. You have only partially taken care of this, and it involves a specific expense. So don’t think your risk gets eliminated when you transfer it. You cannot neutralize your vulnerabilities completely.

Risk management should encompass all the areas of business at all levels. You cannot approach this as an afterthought. So, when you step into the world of entrepreneurship, make sure you focus on this area with as much force as you would on growth, employment generation, and profit-making. Otherwise, nothing would last longer. Things can go disarrayed. All your growth engines may suddenly stop moving, facing a roadblock. And if you don’t have a proper plan, you can get stuck. That’s why it is essential to be careful. Don’t think that only blue-chip companies need to worry. They can still get hold of things because of their financial strength. But you may not be able to afford that situation.