Business risks are the likely dangers that a business enterprise may face if preventative measures or safety precautions are not implemented to avoid them. When a company experiences a particular business risk, the entrepreneur should not point fingers at witches, ghosts or enemies. They occur as a result of poor planning and the failure to establish measures to manage these risks. There are two main types of risks that a business enterprise is likely to face.
These are the Direct Risks and the 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 seriousness 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 collapse of the company. If you are not very careful, it can be hidden from contractors. Like a slow poison, indirect risks, if left unchecked, can ruin a business enterprise. They are quite difficult to control and account for the bulk of business losses. Examples of indirect risks are lack of sales due to defective or poor 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 businessman must be very attentive and alert in the role of supervising him. There should be a regular or routine check of stock 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 every month 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 conveying security, such as employing security personnel and installing security devices. These measures would help to minimize or completely stop cases of theft.
Most of the fires that occur in companies are due to failures in electrical connections and appliances. The contractor must hire a qualified electrician to make all electrical connections or wiring on the business. He has to replace all the weak or defective cables and other electrical devices to avoid the possibility of a fire.
Low sales and patronage of a company’s products can be due to several 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 move the business to a more promising area where there is high patronage for their products.
Inflation and constant changes in labor laws can affect the success of a business enterprise. 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.
It costs entrepreneurs a lot of time and effort to create businesses. 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.