“You don’t concentrate on risks. You concentrate on results. No risk is too great to prevent the necessary job from getting done.” – Chuck Yeager, U.S. Airforce Pilot, and aviation trailblazer
There is risk involved in everything we do, from driving down the street to opening an online storefront to attempting to break the sound barrier like Chuck Yeager. As a business owner, to manage business risk, the first step is to identify it, positive or negative.
Some risks are common to almost every business, such as property losses and business interruption losses. Most of these can be alleviated by assessing your vulnerability and utilizing the appropriate insurance coverage, as well as developing contingency plans. But not all risks can be handled by a simple insurance policy.
What risks can’t typically offload through insurance? Risks that are inherent by-products of running a business. These can be opportunity-based (such as deciding whether to add a new product line) or challenge-based (deciding how to handle the loss of a key customer) risks.
As your business continues to grow, it is crucial that you understand the importance of managing risks. We have some tips to help you identify and manage risk:
Limit the scale. Focus on smaller opportunities until you gain the confidence to pursue larger ones. Through careful planning and execution, you’ll minimize the consequences of any missteps.
Work as a team. Recruit trusted advisors on your staff or in your network and consider their perspectives in your decision.
Separate the good risks from the bad. How? By identifying and assessing potential outcomes. It helps to develop “what if” scenarios. By weighing the major factors, you will focus in on calculated risks, where the potential rewards far outweigh the downsides and avoid reckless gambles that could jeopardize your business. Be the devil’s advocate.
Recognize the consequences of not taking action. Sometimes, in evaluating your options, you may justifiably decide to do nothing—but be aware that doing nothing incurs risks, too. As famous actress Geena Davis said, “If you risk nothing, then you risk everything.”
Learn from your mistakes. Taking calculated risks is an art and arts are learned through experience. At first, taking a risk may take you out of your comfort zone—but remember this adage: Go out on a limb—that’s where the fruit is!
Disclaimer: While this is our Sage Advice, always seek additional business advice from a risk management specialist, attorney, or insurance agent relating to your specific circumstances.