Risk management is about preparing beyond the known risks. Planning for unknown events and market conditions that unfold before you as an entrepreneur is the purpose of risk management. It is necessary that a plan must have these 5 crucial characteristics of risk management in them to avoid any potential pitfalls.
Exercise Professional Skepticism
You should be optimistic about the things you do. There is no doubt about that. But, that optimism should only exist after you exercise skepticism. Be it starting a business or taking an important business decision one must exercise a fair amount of professional skepticism.
Asking tough questions and staying alert and planning for the worst are essential skills of any entrepreneur. We must look at issues, facts and figures from a fresh and skeptical vantage point. We ask questions about data anomalies, scrutinize estimates and validate suppositions.
Risk Management Protects Value
Have a clear understanding of where your most value in your business is. Analyses various scenarios in which your business will come under stress or risk. Finding the weakest chain in the link will tell you where you need more protection. Device strategies to protect the core values of your business often risk management come with sacrificing some amount of growth and cost.
Remember, risk management comes as small cost of insurance compared to the potential risks and pitfalls an entrepreneur and business might face.
Manage risks with Objectivity
A review of a business’s risk must be objective. As entrepreneurs we know of plenty of risks that keeps us up at night. Unnecessary skepticism and fear must be avoided. We should be as objective as possible while planning. When we find something that doesn’t look right, that objectivity enables us to work through the issue in accordance with professional standards. Hence, when we mange risks, we are doing so with objectivity rather than deciding purely with emotion.
Adapt to the Situation
To stay ahead of the wave of risks, entrepreneurs and business will need manage risks by not only planning for it but also adapt to the situation if things don’t go according to plan. Entrepreneurs should adopt new technologies like Artificial Intelligence, leverage data analytics, machine learning, etc. Therefore, one should develop the talents with the skills to make them work in risk management as well.
Risk Management Must Be Proactive
Risk management is not just about building a framework to mitigate and mange risks. One has to be proactive and consistent in effort to look out for potential threats a business might face. Know what actions can be taken to prevent your company from failing. Be cognizant of the environment in which you are operating through risk mapping and early warning systems.
A Stitch in Time Saves Nine.
Today’s businesses face disruption and competition day in and day out. Entrepreneurs should now creatively come up with risk management strategies to protect them and grow while constantly facing the risk of disruptive ideas, natural disasters, politics and so on. Build a risk management framework with these 5 crucial characteristics to be successful even during the toughest of times.
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