Council Post: 10 Risk Management Tips For New Business Owners

 I have a handful of questions I ask myself before making decisions:

• What are the economic ramifications in terms of risk and opportunity cost of not doing something?
• How can I mitigate both?
• What is the worst that can happen?
• What is the likely outcome?

If I get in front of the worst and most likely outcomes and my gut still tells me to move forward, then I can push through my concerns about risk.  

 It's important to protect your business and mitigate risk by getting insurance. Using insurance can remove a great deal of stress from your shoulders.

It's a good idea to understand the different insurance packages out there and to pick the best one for you. Consider adding special coverage depending on the type of business you're in. You want to cover your employees' health and safety, and your most valuable assets.

Managing financial risks should be at the top of a new business owner's mind. You can reduce risk by setting up appropriate payment records and minimizing outstanding balances. It's also important to identify credit risks early on.

Avoid outside financing and loans as much as possible, and focus on building a great product. When you have a great product and make great sales, you should be able to fund your own business.

 To avoid sudden blunders, it's imperative to incorporate preventative measures that will save you when the time comes. This means having the right tools and methods to handle and deal with unexpected situations calmly and effectively.

For example, you could set aside money just in case something comes up and you're left with less than you intended. Being prepared is the best thing you can do to ensure your business stays afloat and prospers.

 A backup plan can help you when you get into a dicey, risk-related situation. As much as we would like to think that all of our ideas are going to work out 100% of the time, they usually don't. In fact, a majority of risks usually result in no change or a slight loss.

If you want to assure yourself that you are ready to take on a risk, make sure you have a backup plan in case things go south.

The best way to handle risk is to plan for it. It's critical to have some type of risk management plan in place. This plan should include identifying all risk scenarios,

• how risk could potentially impact your business,
• contingency planning and recovery
• how to respond to each scenario.

This plan should be shared with all relevant team members.

 New business owners also new to risk management should understand the importance of having a probability-based mindset. Business leaders have to make decisions on matters big and small regularly, and each decision will have its risks and rewards.

You may go with the risky call, the safe call or a call somewhere in between, but as long as you understand the odds, you are more likely to make a sound decision.

 To control growth means controlling risks. To do this, a business owner should first define their growth objectives.

• Prepare a growth strategy to understand the risks to your company.
• Analyze your internal resources, the market, your competitors and distribution channels.
• Then, analyze your receivables. This means doing credit checks on your clients and setting clear payment terms.
• Finally, control debt by negotiating better payment schedules with suppliers or looking at leasing versus buying assets.

In short, a growth strategy is a great way to control risks.