The first step in identifying business risks is to analyze processes. You can perform a SWOT analysis to assess the company`s performance in the following areas: Strengths: Identifying a company`s strengths can help you learn what the company does well. They can also leverage their strengths to protect themselves against business risks. The third type of business risk is operational risk. This risk occurs within the group, especially if the day-to-day activities of a company do not work. In 2012, for example, multinational bank HSBC faced high operational risk and therefore faced a hefty fine from the U.S. Department of Justice when its in-house anti-money laundering team was unable to adequately stop money laundering in Mexico. However, successful entrepreneurs cannot reasonably avoid all risks. Trying to avoid all risks at all costs can hinder the growth of a business. Some calculated risk is required for a company to take risks that allow it to stand out in the market, outperform its competitors, attract customers and make profits. A business is considered an operational risk when its day-to-day operations threaten to reduce its profits. Operational risks can result from employee mistakes, such as overcharging customers.

In addition, a natural disaster such as a tornado, hurricane or flood can damage a company`s buildings or other physical assets and disrupt day-to-day operations. Risk of default: Taking out a business loan at higher interest rates than a business can afford can expose a business to the risk of defaulting or defaulting on the loan. Here are several types of business risks to look out for when assessing a company`s position: Businesses must generate sufficient cash flow to make interest payments on loans and meet other debt-related obligations in a timely manner. Financial risk refers to the flow of money into the business and the possibility of sudden financial loss. A company can be exposed to financial risk if it does not have enough cash to properly manage its debt payments and defaults. As more businesses use online and mobile channels for sales and e-commerce payments, as well as to collect and store customer data, they are exposed to greater hacking opportunities, posing security risks for businesses and their stakeholders. Employees and customers expect businesses to protect their personal and financial information, but despite ongoing efforts to keep that information safe, businesses have fallen victim to data breaches, identity theft, and payment fraud. Reputational risks can include a lawsuit against a company, a product safety recall, negative publicity, and negative online reviews from customers. Companies that suffer reputational damage can even suffer an immediate loss of revenue when customers relocate their operations.

Companies can have additional impacts, including the loss of employees, suppliers and other partners. Without identifying risks, it is difficult to successfully define your goals and define strategies to achieve them. It is a proven method for integrating enterprise risk management into your strategy formulation and business planning processes. Whenever a company`s reputation is ruined, whether by an event resulting from a previous business risk or by another event, it runs the risk of losing customers and damaging its brand loyalty. HSBC`s reputation stagnated after the fine was imposed for bad anti-money laundering practices. Most departmental risk management strategies are based on four principles: prevention, detection, deterrence and response. Good business intelligence plays a key role in prevention – arguably the most important of the four. Business owners are exposed to a variety of business risks, including financial, compliance, cybersecurity, operational, and reputational risks. No company can avoid all risks, but it can take proactive steps to prepare without being deterred from seizing growth opportunities.

Regardless of size, all companies are associated with risks. That`s why enterprise risk management is key to building trust among your internal and external stakeholders – employees want to ensure that every business decision is properly considered before it is made, that losses are minimized, and that successes are maximized. The first step brands typically take is to identify all sources of risk in their business plan. These are not only external risks, but also from within the company itself. It is important to take steps to reduce risks as soon as they occur. Management should develop a plan to address identifiable risks before they become too significant. A company may be exposed to a security risk if it does not develop or follow cybersecurity strategies. Ineffective employee training, lack of software testing, and inadequate security update policies can jeopardize a company`s finances and reputation.