Business Risk Management
Hi there and welcome back to another edition of Vaisa’s informative business blog! Today’s subject is Business Risk Management however, I urge all first-time readers to first go through previous articles to easily comprehend today’s discussion.
Of course, as emphasized from the very beginning of this blog, venturing into entrepreneurship and business is a huge risk. It’s more or less like visiting and gambling in the streets of Las Vegas; you could win big or lose everything and so it is imperative that one is prepared to combat any upcoming risks the business might encounter. “Business Risk management is a subset of risk management used to evaluate the business risks involved if any changes occur in the business operations, systems and process. It identifies, prioritizes and addresses the risk to minimize penalties from unexpected incidents, by keeping them on track. It also enables an integrated response to multiple risks, and facilitates a more informed risk-based decision-making capability,”.
Each business, company and or organization is liable to risk at any given time, therefore it is important to have a consultant on board who will assess potential risk to the business. This will assist with drawing up a strategy and setting up policies designed to address risk as and when it occurs. The business risk management consultant will conduct a risk assessment to help a business determine which risks should be covered by insurance. A risk assessment should begin and end with specific business objectives that are pivotal value drivers. This will be very beneficial in organizing and allocating resources by setting up organizational priorities.
Types of Business Risks
- Building risks are the most common type of physical risk. This includes possible fires or explosions, and any harm to the business ‘physical premises/building and physical assets thereof. Moreover, this includes factors which are not under the control of business environment, such as fallout of machinery or dangerous chemical, and other natural disasters.
- Financial risk: The economy is constantly changing as the markets fluctuate and things are tougher now more than ever with rise of the Covid-19 pandemic. Examples of financial risk include risk in pricing, currency exchange and during liquidation of any asset. Some positive changes are good for the economy, while negative events can reduce sales. It’s crucial to observe changes and trends to potentially identify and plan for an economic downturn. To overcome economic risk as a business, see to it that money is preserved into savings as much as possible to maintain a steady cashflow. Furthermore, your business should operate with a lean budget with low overhead through all economic cycles as part of your business plan. A great deal of businesses take risk with their financial assets, sometimes choosing a wrong supplier or distributor which may backfire.
- Compliance risk: Business owners face an abundance of laws and regulations to comply with. Staying well versed in applicable laws from organizations like BURs and CIPA can help in minimizing compliance risks. Non-compliance may lead to hefty fines and penalties. As a leader, stay informed of laws and make sure your team and staff is on board too.
- Operational and Strategic risk: This is the evaluation of risk loss resulting from internal process, system, people or due to any external factor through which a company operates. Many operational risks are also very much people-related. An employee might make mistakes that cost time and money. Whether it’s a people or process failure, these operational risks can negatively impact your business in terms of money, time and reputation. Address each of these potential operational risks through training and a business continuity plan. Both tactics provide a way to think about what could go wrong and establish a backup system or proactive. The latter may arise from poor decision-making and the wrong business plans or ultimately losing competition in the market. Failure to respond to changes in the business environment or inadequate capital allocation also represents strategic risk.
The Role of Customers in Business
Customers or clients play a huge role in the success of a business and this is more than just taking money from them as they engage in products and services. They are the mouthpiece of any business and any negative commentary from a customer can result in some serious backlash for the business. Some organizations have since set up suggestion boxes within their offices to allow free opinions and feedback from customers on services rendered and products purchased. This is mostly because no function handles a broader range of customer touchpoints than customer care. Business Executives would be wise to make it the centerpiece of any effort to transform the customer experience. Poor customer service could lead to less people using a commodity hence increasing threats to the business, while good customer service improves business receptivity thereby decreasing risk level to some extent. As a business, having strategies in place to improve customer service delivery is essential in achieving business targets and objectives.
Covid-19 and Public Transport in Gaborone
Covid-19 has become part and parcel of our livelihoods all over the world and needless to say, the virus has contributed greatly to the increment of basically just about everything. The cost of living has gone up and people, businesses alike are failing to cope, with some slowly adjusting to the new normal. One of the industries hit hardest Botswana has been the transport sector which has seen a spike in increased fuel levy. Prior to that, members of the transport sector lost a lot of business following movement restrictions. However, while on an individual level, the increase is a bit of a pinch, for public transport, it is good businesses as some members of the society have resorted to an increase in the use of public transport to cut on their own personal costs.
Speaking on anonymity, one driver for the Old Naledi combis (otherwise known as Zola) has explained that they have witnessed an increase in clients from the corporate space, especially those commuting to commerce park than in previous years, giving the impression that either commerce park has seen a rise in new employees, or if in fact, people are leaving their private vehicles at home. However, there is not much of a difference for them in terms of profits as they, as a collective of drivers specific to Zola, have not increased their fee from 4 pula to 5 pula. He mentioned that this is because in as much as they need to cover up for the money lost during lockdown, they relate with societal needs, more so that residents of Zola are middle to lower income earners. The driver in question concluded by saying they sometimes reach expected targets and for days business is slow, the causes are least connected to fuel levy increase.
Miss Victoria Marumo is a journalist with a distinctive and creative voice. Her avid reading complements well with her writing in providing captivating information on business topics.Writer: Victoria Marumo