Business risks are the likely dangers that a business enterprise may face if preventative measures or security precautions are not implemented to avoid them. When a business experiences a particular business risk, the business owner should not point fingers at witches, ghosts, or enemies. They occur as a result of poor planning and the lack of establishing measures to manage these risks. There are two main types of risks that a business enterprise is likely to face.
These are Direct Risks and Indirect Risks.
1. Direct risks: This is a type of business risk that could completely collapse a business venture. They directly affect the company and paralyze all its commercial activities. Due to the severity of direct risks, employers must establish preventive measures to reduce them. Examples of direct risks include theft, fire, bankruptcy, misuse of capital through irresponsible spending, etc.
2. Indirect risks: This type of business risk slowly causes the company to collapse. If not very careful, it can be hidden from contractors. Like a slow poison, spillover risks, if left unchecked, can ruin a business venture. They are quite difficult to control and account for the bulk of trading losses. Examples of indirect risks are lack of sales due to defective or low-quality products, incorrect business locations, currency inflation, introduction of new taxes, changes in labor laws, etc.
Business risks, whether direct or indirect, can be managed or controlled. The employer must be very attentive and alert in his supervisory function. There must be a regular or routine control of stocks and finished products. Only the employer cannot do this job. An accountant or bookkeeper should be hired and assigned to check the company’s accounts monthly or even daily, depending on the size of the company or the pace of product purchases.
In addition, the employer has to increase vigilance and security by transmitting security, such as employing security personnel and installing security devices. These measures would help minimize or completely stop theft cases.
Most of the sources of fire that occur in companies are due to failures in electrical connections and electrical appliances. The contractor must hire a qualified electrician to make all electrical connections or wiring in the business. He has to replace all the weak or faulty cables and other electrical appliances to avoid the possibility of a fire.
Poor sales and sponsorship of a company’s products can be caused by a number of factors. The most important of these is due to the low-quality nature of the products and the wrong business location. The entrepreneur must undertake the training of his staff members while constantly checking the quality of the product. He has to use quality and durable materials to manufacture his products. Also, if the wrong location of the business is causing the drop in product sales, the entrepreneur should relocate the business to a more promising area where there is high patronage for their products.
Inflation and constantly changing labor laws can affect the success of a business venture. An entrepreneur must always be alert to these changes. He can do this by keeping in touch with the relevant ministries to find out what new changes are planned that may affect one’s business.
Entrepreneurs take a lot of time and effort to start companies. Therefore, they must carefully guard against any internal or external danger that may result in their collapse. Identifying and controlling potential threats to businesses is the guaranteed way to succeed.