Know which business risks can destroy your business
Tuesday, June 4, 2013/
In general, there are two types of business risks (and uncertainties) that not only can you not eliminate from your business, but they actually determine the raison d’être of your business: strategy risk and execution risk.
I call these genuine business risks.
Almost every other risk in your business is an unnecessary bad risk; e.g., bad bookkeeping, weak recruitment strategy, weak understanding of your market, low customer satisfaction, mispricing, etc.
Most businesses fail or struggle to grow due to these unnecessary bad risks! Ironically these risks are under your control. These risks can (and should) be almost eliminated.
How to manage strategy and execution risks?
The main reasons business risks cannot be eliminated is because they are impacted by external factors outside your direct control – new technology, competition, customer preference, economic environment, etc.
For instance, you cannot control the entry of a very powerful competitor with top customer service (strategy risk), but you can control your own customer experience through the quality of your product/service and adequate staff training.
You cannot fully control or predict the reaction of your team to your new strategy (execution risk), but you can minimise this by ensuring they are involved and engaged when your strategy was being designed.
In brief, minimising and managing strategy and execution risks are done indirectly by controlling the factors that matter most.
How to manage bad risks?
By comparison, managing your bad risks is directly under your control. You can eliminate them by properly designed systems and processes.
Executing a business strategy before getting your bad risks in check is like preparing to fly a plane without any safety checks. If you make it, it is no more than a lucky run of Russian roulette.
From the frontlines
Five reasons AI is better at making business decisions than you Anthony Aarons Epifini co-founder
'Few are destined to be unicorns': When is the right time to sell your startup? Peter Forbes HROnboard founder
Forget gender quotas: It's time to review your definition of diversity Inga Latham SiteMinder chief product officer
How to assemble a board of directors that will make, not break, your startup Mark Rohald Cluey Learning co-founder
From disrupted to disrupter: What I learnt moving from corporate to startup Tim Shepherd CIMET director
Imagine the worst-case scenario for a startup founder. It happened to me Sam Jockel ParentTV founder