How Can You Reduce Risk in Business?
When it comes to business, there’s almost always some risk involved. You need to spend money to make money, and sometimes will need to keep on spending money- even when your sales are slow just to keep things going. Worst case scenario, you can end up with a failed venture and thousands of lost dollars and charges against you- so it’s something to go into with your eyes open! Here are some of the best ways to eliminate risk.
Some areas of business are inherently riskier than others. Take manufacturing for example, if you decide to run your own plant you have to ensure that health and safety is being followed to the letter. With employees working at heights, with vehicles, with chemicals or high heats, there’s more chances of accidents occuring than with other types of workplaces. Construction is another example, and not only this but it can be a struggle finding hardworking and qualified people to fill the roles. You can limit your own businesses risk by outsourcing to a third party company that utilises a CIS (construction industry scheme) instead. Since the company you will outsource to will be professionals in their field, they will already have the equipment, workers and experience to complete tasks to the best standard. Since their business is their own responsibility, you eliminate your own risks.
Obtain the correct insurances
Another way you can reduce risk is by taking out the correct insurances. You’re then essentially transferring the risk to to them, and can insure everything from damage to your facilities to product liability, injuries to customers or suppliers and even death or incapacity due to your business. That way, you know that you won’t be left out of pocket in a worst case situation. Without the right insurance, a lawsuit or case taken out against you could lead to bankruptcy and end your venture prematurely.
Get your finances right
There are many financial risks that the average business will need to consider. One of the ways you can reduce this is by minimising outstanding balances, and keeping outstanding loans and financing needs to a minimum. Most businesses will need to rely on credit to get started initially, but once you start turning a profit, paying these down should be a priority. That way you avoid high interest charges, and prevent yourself falling into trouble if business slows down. When it comes to customers, you will want to evaluate their credit and in some cases, ask for advance payment from customers who don’t meet the standards. If you’re the sort of business that hires products or provides services in advance, this prevents you from having to chase up payment after. Another important tip to bear in mind is that you should control your company’s growth at a rate that the business can finance internally. For example, if you can’t pay off some loans, replace short-term credit with long-term, fixed-rate loans for the best rates.
Business owners, what proactive ways have you ensured that you’re minimising your risk?