Before you start developing a business risk management strategy, you should know about the overall risk management theory and should be aware of all the types of risks that are usually faced by a business. In addition to this, you must also be aware of the main causes of these risks, as only then you will come in a position to determine the best strategies to deal with these risks. If you are not prepared to deal with the risks, you might never be able to enjoy the competitive advantage in your industry. Only those businesses are successful overall which take a proactive approach towards risk management and learns the causes and deal with them in advance. As per Marika Tolz, you must know the causes of risks that are associated to your business, in order to deal with them like a professional businessperson. Unfortunately, many new businesspersons are not really aware of these risks, and they never work on finding the causes to them, and as a result they are unable to enjoy more profits. Yes, profits are linked to risk management.
Main types of major business risks
Business risks can take a lot of different forms, and it can be really dangerous if not taken care of in an appropriate manner. If you are planning to deal with these risks, you must be aware of all the risk types which are generally faced by businesses.
- Compliance risks – Rules are regulations are introduced for business by local and foreign laws, and it become difficult for an international business to keep a track of all the changes that might have happened.
- Financial risks – This is an inherent risk, and it is not only about the fraud and mismanagement of assets, but this is also about the liquidity status of the company. Whether the company will stay profitable after taking a specific decision?
- Operational risks – These risks are related to operations of a business where it is no longer in a position to offer the services and products I the required quantities.
- Strategic risks – These risks are mostly affected by external sources, and there is a need to cater all these risks in a timely manner in order to create the best risk management plan.
Causes of the major business risks
After you know the major types of business risks, it is important to know about the causes as well, because only then you will be able to deal with these risks when you know from where they are originating.
- Human causes – Risks may arise as a result of negligence from your work force. Strikes and other such activities are also a common cause of risks.
- Natural triggers – There are many natural triggers that can cause risks, and there is a need to stay prepared about these risks.
- Economic causes – The best example of economic causes for risks is the change and fluctuation in prices.