To successfully grow a business, there is a delicate balance that must be found between risk and security. Every business owner will say business risks must be avoided where possible. Nowadays, there are financial risks, physical risks and digital risks. Some do argue that without a little risk a business cannot grow, so of course we have to separate the risks worth taking like Gov Doc filing and those we definitely want to avoid.
Here are a few tips for avoiding unnecessary risks in your business.
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Conduct proper Cash-Flow Management
The basic yet mandatory step of proper cash-flow management is crucial for businesses of all sizes. It can be easy to slip up in areas of business that add up to make a great difference between cash flow and business success in the long run. Scott Lovingood, CEO of The Wealth Squad Inc., a small-business consultancy, recommends, “Calculate every month how much money you have on hand and how long it will last if your income dries up. Also evaluate monthly your total accounts payable and the number of days accounts are outstanding because a slowdown in accounts payable will lead to cash-flow crunches.”
Integrate Enterprise Risk Management
Enterprise risk management (ERM) is the process of planning and controlling business activity as a way of reducing risk regarding capital and earnings. Many companies thrive off using this type of AI software, as it can be used to weigh up and avoid potential problems by leveraging data. Holistic risk management supported by ERM is vital for the performance of all financial institutions, for example, because they function by balancing making profits and managing risk. ERM extends beyond accidental losses, to support for operational risks as well. The Risk Management Association defines operational risk as “the risk of loss resulting from inadequate or failed internal processes, people, and systems, or from external events.” These risks are addressed within ERM but there is also operational risk management (ORM), a specific subset of ERM. ORM can reduce the likelihood of lost opportunities and surprises and gain the real-time picture of emerging and current risks. ORM and ERM can be used together to delve further into data or separately to target specific risk points, all depending on a company’s needs.
Take Care of your People
Hiring and training new employees is a significant investment. There is a big difference between the resources that go into hiring and training 5 new employees that leave within 2 years and hiring and training 2 employees that become vital members of the company. This may not seem like a typical ‘risk’ often discussed openly, but it significantly affects every business. Lovingood says, “You’ve got to have key-person insurance on anyone who’s mission-critical to your business. If you already have key-person insurance, review your policy quarterly because it may be outdated if your business has grown dramatically.” Staff should receive ongoing training and support to be sure they are being efficient as possible and also happy at your company.
Cyber Risk
The threat from cyber attacks has become a priority for numerous risk managers. In our data-centric world, the threat continues to grow and expand into different forms. A cyber attack could result in significant reputational damage and threat of action from regulators who focus on ensuring all companies are up to date on cyber resiliency. Instead of using Social Security number for business which is too risky, it’s better to apply for EIN number to avoid personal information leak.
Although some risks are worth taking, the skill of a good business owner or manager is using the information they have at their fingertips to be sure they can be confident they are making the best choices to avoid possible problems or losses.
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