When you start your dream venture, there’s a lot to be excited about yet you need to be careful about risks and threats as well. Realistically speaking, there will be a lot more to face than you can imagine when you enter the industry. Every start-up, therefore, should have a plan in place to counter unexpected circumstances. Proactive business risk management is the key to survival and growth in a landscape fraught with challenges.
The approach not only helps you in truly future-proofing your success but may also enable the business to attract new clients, secure new markets, and drive revenue in the long run. So it becomes important to evaluate the diverse categories of risks you may face down the line and have a plan to manage all of them. Let us list the ones you need to be vigilant about as a new entrepreneur.
When it comes to risk mitigation and management, the top priority for any startup owner is obviously the financial risk. It is a broad term that covers all kinds of monetary threats and challenges such as fluctuating exchange rates, cash flow bottlenecks, and loans at risk of default. In fact, these issues can grow in parallel to the growth of your business, so you need to go the extra mile to handle them effectively. From understanding your short-term finances to planning for the long run, a complete picture puts you in a better position for managing them. Also, seeking expert advice at every stage and for every financial decision is a good idea.
If you think that your start-up is vulnerable to external threats only, you probably don’t realize the seriousness of operational risks. Typically, these arise due to human errors and wrong decisions within the organization. Fortunately, they are easy to anticipate and manage because you have greater control over what happens within. For example, implementing proper processes and policies for all operations can mitigate the threat to a considerable extent. Employee training and monitoring can go a long way in preventing them as well.
Legal issues are something most startup owners tend to overlook until the worst happens. Consider getting involved in a case relating to a breach of contract or employee discrimination. You may even land into trouble if an employee driving a business vehicle has an accident on duty. The victim may hire car accident attorneys who fight hard for justice and claim massive compensation from your company. Legal disputes can cost money and reputation, so you need to prevent them in the first place. Further, having a legal team on board is a good way to handle the situation before they get worse.
For any business, new or established, reputation matters the most and you wouldn’t want to put it at stake at any cost. The threats of damage to a firm’s reputation come in various forms, involving ethics, sustainability, safety, and security. Many times, it may be related to legal claims such as in defective product cases, where you end up facing litigation and losing your reputation as well. It is important to take such situations very seriously and avoid any such action that may pose a threat to your reputation.
As the name suggests, regulatory risk is associated with the non-compliance of regulations and laws which apply to your business. Ignoring them can cause penalties and legal issues in some cases. In others, they may increase the costs of operations, reduce the return on investment or take away the competitive advantage. The bottom line is that they will have a negative impact on your venture. The best way to deal with these threats is to stay on top of compliance. Additionally, you should always keep track of new rules which affect your company directly and indirectly.
One of the risks of modern times is those related to cyber threats. The fact that businesses use the internet and cloud-based systems and infrastructure these days is making them vulnerable. Hackers and cybercriminals are targeting companies everywhere, regardless of their industry, size, and turnover. Mitigating this risk is possible by having a stringent cybersecurity policy in place. You should do everything possible to protect company data and personal information of customers because a breach can cause financial and reputational damage.
Considering the diverse risks that you face as a startup or even during the growth phase, creating a plan to manage them does not remain a choice. Ideally, you should start by ranking the possible threats and covering them all in the order of priority. The sooner, the better!