Doing business always assumes risk. While it is inevitable and virtually impossible to eliminate, it does not mean that it cannot be reduced. Risk reduction measures to mitigate and or avoid losses are employed by businesses in various forms. Some of these are the following:
- Creating and following a business plan – The business plan outlines all the aspects of operations, from marketing to financial projections. Writing the business plan entails a lot of research and forethought. While the business may run differently from the projections, risks are mitigated because details written there have been thought out long before operations, with some problems already anticipated and avoided.
Of course, the business plan has to be periodically evaluated and adjustments have to be made according to how the business is performing. Building the business plan requires a lot of preparation and preparation is often the best deterrent to failure.
- Purchase insurance plans and deal with partners who are insured – Newcomers in the industry may make the rookie mistake of underestimating the value of getting insurance. Dealing with businesses and the public on a daily basis exposes the business to risk.
Accidents caused by a product or service of the company, a late delivery or a similar mishap may result to lawsuits and an award for liability and damages. Getting a liability insurance helps protect the business from these risks. Additionally, dealing with partners, concessionaires, subcontractors, suppliers and other third parties also expose the business to the same risk.
It is important that the other party is insured as well, and in some occasions, willing to extend the insurance coverage to the business as well, as may be provided for in the contract. To ensure this, certificates of insurance are usually required prior to the completion of a contract. The business should also engage the services of a certificate of insurance tracker like VersiTrax to do due diligence and assess the veracity of the certificates. Seeking the help of a reliable risk management company saves companies a lot of money from bad dealings.
- Monitor business performance – In order to manage risks, identifying where these risks occur in the business is a precondition. Monitoring areas of the business susceptible to risk is just as importance as identifying the target market and determining market preferences.
Monitoring risk includes being knowledgeable of competition, changes in the market place, areas where customer fraud may take place, and identifying the weaknesses of the company.
By using the above-mentioned strategies, the business does not incur unnecessary and avoidable losses, freeing the saved money for other more important expenses of the business.