Managing Business Risks: What SMEs Business Owners Should Know?

Building an enterprise requires labor and risks. While some risks are more harmful than others. Here are a few risks that every business owner should keep in mind.

Operating a business is a herculean task, which can reap the dividends of customers, revenue, and fulfillment. While success is the objective, the business risk may prevent you from reaching your soul.

As regards risk management, there are measures you can take. Here are seven kinds of business risks you may want to manage in your company.

Economic Risk

The economy is rapidly transforming as the markets fluctuate. Some favorable changes are desirable for the economy, which results in profitable purchase environments, while negative circumstances can decrease sales. It is crucial to observe shifts and trends to potentially identify and plan for an economic downturn.

To offset economic risk, hold as much money as possible to maintain a steady cash flow Also, you may operate a lean budget with low overhead through all economic processes as part of your business plan.

Compliance Risk

Business owners face an abundance of rules and regulations to concede to. For instance, contemporary data protection and payment processing compliance could impact how you handle certain facets of your operation. Staying well versed in applicable laws from Federal agencies like the Occupational Safety and Health Administration (OSHA) or the Environmental Protection Agency (EPA) as well as state and local agencies can help minimize compliance risks.

If you depend on all your revenue from one or two clients, your financial risk could be significant if one or both no longer use your services. Begin to market your services to diversify your base so the loss of one will not wreck your bottom line.

Non-compliance may result in significant fines and penalties. Business owners should watchful in compliance by uniting with an industry organization, regularly examining government agency announcements, and seeking help from consultants who specialize in compliance.

Security and Fraud Risk

As more customers use online and mobile channels to share personal data, there are also tremendous chances for hacking. Not only does this risk affect trust and prestige, but a company is also financially liable for any data breaches or fraud. To achieve significant enterprise risk management, business owners need to focus on protection solutions as well as fraud detection tools for employees and customers’ sensitization about how to detect any potential issues.

Financial Risk

This business risk may apply to credit extended to customers or your own company’s debt load. Interest rate instabilities can also be a threat. Hence, modifying your business plan will help you avoid negative cash flow or creating an unexpected loss. Business owners need to keep debt to a minimum and create a plan that will start reducing that debt load as soon as possible.

Reputation Risk

There has always been the risk that an unhappy customer, product or service failure, negative press, or lawsuit can adversely impact a company’s brand reputation. Nevertheless, social media has intensified the scope of reputation risk. Just one negative tweet or awful review can reduce your customer following and cause revenue to plummet.

To manage this risk, business owners should leverage reputation management strategies to always survey what others are expressing about the company online and offline. Business owners should also be prepared to answer those comments and help handle any concerns immediately.

Operational Risk

This business risk can happen internally, externally, or involve a variety of factors. Something could suddenly happen that forces you to lose business continuity. The events could be a natural disaster or fire that destroys your physical business. Perhaps, it might involve a server outage induced by technical problems, individuals, or a power cut. Numerous operational risks are also people related. An employee might commit errors that cost time and money.

Whether it is a people or process failure, these operational risks can adversely affect your business in terms of money, time, and reputation.

Business owners need to handle each of these possible operational risks through training and a business continuity plan. Both approaches provide a way to think about what could go wrong and launch a backup system or proactive steps to ensure operations are not affected.

For instance, more businesses are using cloud storage to protect the company’s data and rely on remote team members to maintain operations. Automating more processes also helps to reduce people's failures.

Competition Risk

While business owners may be aware that there is always competition in their industry, it is easy to miss out on what businesses are offering that may appeal to your customers.

In this case, the business risk involves a company leader becoming so comfortable with their success and the status quo that they do not look for ways to pivot or make continual improvements. The increasing competition combined with hesitation to change may result in the loss of customers.

Enterprise risk management means a company must continually reassess its performance, refine its strategy, and maintain a robust, interactive relationship with its audience and customers. Also, it is crucial to keep an eye on the competition by regularly investigating how they use online and social media channels.

Tax Risk

As business owners, if there is any nightmare you might want to avoid, it is abandoning the responsibility of paying your taxes. Come to think of it, you have built a reputation for your brand and your business is growing on an exponential level; however, you need to also consider the risk of not remitting your taxes. Aside from penalties from relevant tax authorities, there may be other imposed punishments that may hinder your business performance.

For the sake of clarity, SMEs business owners need to consider and register the following taxes, remit, and file as at when due: Pay As You Earn (PAYE), Value Added Tax (VAT), Company Income Tax (CIT), Withholding Tax (WHT), etc.

At Accounteer, we conduct a tax audit for businesses and help them to be tax compliant. Should you require us to handle your tax computations and other statutory remittances, kindly, send an email to team@accounteer.com

In conclusion, although you will never be able to eliminate business risk, proactive planning for it can help. Being conversant with risk management strategies is important in helping you save money and time while protecting the trust, reputation, and customer base you have worked so hard to achieve.