Risk can be identified as an event probability and its consequences. To manage these risks processes, methods and tools can be used. Risk management mainly looks upon what could go wrong, and how to stop this from happening i.e. how to deal with the same risks.
In the business cycle, business risks are very common and they can help in the business growth or else can damage the business. Some of the risks can be ordinary while some others cannot be identified and thus appear due to extraordinary courses. To take care of business assets, companies take the necessary steps. The only way of managing business risk is to avoid it. A hospital may avoid taking high risks for the well-being of its patients. Through mitigation also company manages risks. These can be seen with software companies, were to mitigate the risk of a new program not functioning by releasing it in stages.
In certain situations, the risk is taken away from the organization by the business. A cost should be given if any building is damaged or broken, for that property insurance can be issued, thus transferring the risk away from the organization. Another way of managing risk is by accepting the risk. The risks faced by your business can be understood by the proper risk management system which in turn will help in achieving your business goals and objectives. Another risk involved is in entering new markets or at the launch of a new product. Here the risk you may face includes the competitors and the second factor is the redundancy.
Types of risks:
- Strategic risks (based on the competitor)
- Environmental risks (includes natural disasters)
- Health and safety risks
- Changing industry
According to the financial structure of your business and its management, business transactions, financial risk can be determined. Here your daily financial operations are observed, i.e. cash flow and if you are very much dependent on a particular customer this could have serious indications on your business practicality as this customer could go out of business. Proper risk evaluation will help you to analyze the risk and take better action to prevent or minimize it. Some tools can be used in evaluating such risks. On a scale of ten, you can mark the rate of a risk occurring. Thus plans can be created according to the extent of risk occurred.
One way of managing risks is through accepting it, reducing it and then eliminating it. Your business quality and returns can be improved through good risk management.