According to the United Nations Industrial Development Organisation, studies have revealed that only about 20 percent of small and medium-sized businesses in Nigeria have managed to survive. Many of them are faced with business risks they they have no idea of how to overcome them.
If you do not want to be one of the other 80 percent, it is essential that you devise an effective strategy for reducing your business risk. This is not something you wish out. If you don’t meticulously work towards overcoming them, it will hit you like the whirlwind.
In order to help you overcome business risk, we shall be looking at a number of steps that can make your business survive and thrive in the long run.
How to Mitigate Business Risks in Today’s Economy
Table of Contents
Offload Your Risks onto Insurers
One of the best ways to minimize your business risk is to obtain insurance protection for your business. If there is one kind of insurance you definitely need, it will be general liability insurance.
This type of insurance will protect you against lawsuits pertaining to product failure, employee conduct, and other issues. If you want more comprehensive coverage, you can opt for a business owner’s policy, which covers liability and business interruption.
It is also a good idea to get a life insurance policy if your business is illiquid and the main source of income for your family.
Establish Solid Contract Procedures
Contract disputes are a common problem faced by entrepreneurs, and they can result in substantial losses if not well managed within a definite period. Many businesses across the world have gone down the drain as a result of series of unresolved contract disputes.
In order to lower the risk of contract disputes, you need to establish reliable contract procedures that enable both parties to understand exactly what they should expect from each other and the rules they need to follow. Before you sign or offer a contract, it is best that you have it reviewed by a lawyer first.
Adopt Systems Approach
In a small business, risk management comes down to operating procedures. As such, it is important that you establish standard systems and training procedures for handling day-to-day operations, critical tasks, and projects.
Also, apply regular risk analysis to all your business systems, from hiring to sales, so that your employees will be able to identify and mitigate the risks involved in their duties.
Be Open to Options
Many business owners have their personal finances tied to their businesses. This is not a good idea because they can lose their personal assets if their businesses fail. If you are guilty of that, take caution. Your business is a different entity from you and should be treated as such.
To reduce this risk, you can change the structure of your business to one that allows you to keep your business and personal finances separate. Alternatively, you can bring in a partner to inject capital and share your business risk. This can be especially helpful if you have or are trying to get a small business loan.
An open approach is also recommended when it comes to the people involved in your business. Research shows over 70% of people don’t enjoy their jobs and you don’t want this to be the case in your business. Unhappy employees quickly lead to business losses
A proper risk management strategy can help your business prevent unnecessary losses and build a solid foundation for growth. It can mean the difference between success and failure. Ready to mitigate risks and thrive irrespective of what the economy is saying? Take note of following: be open to options, offload your business risks onto insurers, establish a standard contract procedure and develop a business system that is proven to work whether you are there or not.
You can watch a quick video below:
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