How to Manage Risk in Your Small Business?

Mika

VIP Contributor
There is one truth about business irrespective of size (small, medium, or large businesses). The higher the investment, the more risk there is. In other words, if you invested $1000, your business will be in greater danger than the one that is financed with just $100. interestingly, the higher the investment, the more profits you make. Higher investment means you are producing more products or expensive products. Your profit margin will be bigger if you are selling more products or high priced products (a product that cost you a lot of money to manufacture)

While big businesses are built to huge investment funds and have the backing of big investors, they can easily manage the risk because they start losing money, they will pump more money into the business and market aggressively, produce better products and manage to build profits. However, as a small business owner, you do not have that leverage.

In order to manage business risk, you can do a number of things, such as reduce your running cost, get a partnership business, etc.
 
There are what we call calculated risks. This kind of risk has been weighed and found that the success factor is higher than the risk factor. You don't take risks without ascertaining if you even have a chance of making it out unscathed. Businesses don't just take risks like that. They sit and weigh the risks involved and they don't commit so much to a project of high risk. They grow that kind of project in a systemic pattern.

Also, for every risky venture, have a plan B. This is a backup plan that you can fall back on if it all comes crashing down. Every risky venture also has measures for managing the risks involved. The problem with small businesses and risks is that they don't take the time to study everything about what they want to venture into. Most times, their eyes are always on the profit margins. Risks can always be managed if you are prepared ahead of time.
 
Risk in business is normal so we need to add it to plan of business and get idea of how to manage risk and become successful. First of, a business owner needs to understand the importance of his production and what can makes it less important if a particular thing is done. There should be preventive measure for protection of production in the company. Such as production of bottled water for instance, you ensure the machinery and workers produce neat and clean bottled water for successful sales in the market. So also your investment needs insurance covered in case of natural disasters that may put business into danger. However avoiding risk is the work of management to control the activities of business in protective ways and render nice service to consumer or customers. If a business owner cannot handle risk management aspect on business, he can hire a professional risk management officer to help.
 
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