Risk is an inevitable part of starting and growing a business. It is impossible to control everything but there are many ways to limit it.
The following are some of the areas that business owners can focus inorder to reduce risks that arise from running a business.
1.Prioritize
2.Buy insurance
3.Limit liability
4.Implement a quality assurance program
5.Limit high risk customers
6.Appoint a risk management team
Prioritize: The first step in creating a risk management plan should always be to prioritize risks and threats. You can do so by using a universal scale based on each risk,s likelihood of happening. Moreover, you can prioritize risks with risk matrices.
They are sorted by probability x impact. The higher the probability of a risk, the higher the impact. Which means subsequent risk response priority will also be high.
Buy insurance:Insurance in risk management serves as a financial safety net. Through the purchase of insurance , policyholders transfer the risk of financial losses to an insurance company in exchange for the payment of a premium. It is also a way to reduce the financial impact of a business interruption, loss or damage to a facility or equipment
Limit your liability: To limit your liability risk is to organize your business in a way that sets your exposure to risk to a level that is comfortable for you considering your assets, tax needs and business control. Again, there should also be a limited liability , which is a form of legal protection for shareholders and owners that prevents individuals from being held personally responsible for their company, s debts or financial losses
Implement a quality assurance program: The following seven steps are essential in implementing a quality assurance program inorder to reduce risks in business.
- Identify organizational goals
- Identify critical success factors
- Identify internal and external customers
- Customer feedback is very important
- Implement continuous improvements
- Select quality management software
- Measure your results.
Limit high risk customers: There are risk management tools in limiting high risk customers and the include:
- Customer Due Diligence
- Anti- money laundry(AML) solutions
- Know your customer
- Enhance transaction monitoring
- Beneficial ownership registries.
Appoint a risk management team: This team provides an overview of the organization’s risks/opportunities and ensure compliance with their risk management process. The identify, analyze, evaluate and beat loss exposures and monitor risk control and financial resources to mitigate the adverse effects of loss.
