90 percent of all startups in India fail within the first five years of business, according to a survey by the Institute for Business Value and Oxford Economics. Business risks are always present, and preparing for them is of paramount importance if you want to keep your business afloat. Not to mention, maintaining your supply line or hiring a good business analyst. In case you needed some extra motivation, however, here are three significant dangers you might put your business in if you don’t properly prepare for business risks.
Asset Theft, Embezzlement, and Fraud
Ideally, the management of business risks should be ingrained in the culture of your corporation, influencing your courses of action and even staff and admin positions. Incorporating proper risk analysis, even for part-time positions, shows that you’re being serious when it comes to securing your business. The perpetrators of such crimes most often come in the form of employees and clients of poor moral character and no loyalty to the company. Failing to risk-manage in the human resources sector will signal to such bad actors that they can get away with theft, which can often result in a serious blow to your assets.
Poor risk management can get you at odds with many laws and regulations, and one of the most common reasons for this is the lack of proper insurance. Observing employee rights entails reviewing law-mandated insurance packages and other benefits for your employees, to ensure maximum quality of life and satisfaction. The workforce is the lifeblood of the business and compensating for any risk in this department can shield your business against the worst outcomes.
A notable example of a business being hurt by not preparing for insurance risks is the case of a Whataburger employee whose health concerns weren’t given proper attention. The employee passed away in the workplace, and Whataburger now faces a lawsuit. Worker quality-of-life improvements such as worker’s comp prove invaluable in protecting employee well-being and preventing potential employee lawsuits, according to Cerity. Of course, lawsuits can still come if the offended party perceives an illegality even if there isn’t one. Still, covering your legal bases minimizes the chance of this happening.
Severe Financial Losses
Businesses live and die by the practice of running risks, but failing to establish proper lifelines can cause massive losses because of a bad gamble. You could lose an investment because you didn’t properly prepare for business expansion or lose market share because you ignored the risks of changing market conditions. Your business may very well never fully recover from a serious blow if you don’t put in place defense mechanisms against the risks you have to take.
Perhaps the most tangible consequence of failing to minimize business risk is losing your hard-earned money. Managing business risk is necessary if you don’t want the capital you put into your business, as well as your profits, to go to waste. Protecting your company entails substantial gain; failing to do so threatens it with severe loss.
Successful business risk management involves methods that provide a comprehensive, detailed assessment of risks, and formulating solutions that are ingrained deep within your company’s network, right down to the part-time employee level. With so many repercussions involved, you simply can’t afford not to manage business risk.