Risks exist in every company and can damage a company and even endanger its survival. Therefore, it is important to be aware of the different risks, understand their potential impact on a business and know how to manage them effectively. This article gives some tips for minimizing risk:
- A company’s product and service offerings must change with customer preferences. Over-reliance on a single product (or a few products) should also be avoided.
- It is advisable to have alternative supply chains (including suppliers and distribution channels). Good relationships must be established with all relevant parties.
- Debt helps businesses grow. However, having too much debt can be dangerous and should be kept to manageable levels.
- Being dependent on one or a small number of clients can be very risky and should be avoided whenever possible.
- Appropriate financial planning must be carried out. Cash flow planning is one area that can identify potential risks and proactive action can then be taken.
- Financial management should be carried out continuously. Quota analyzes show where problem areas exist (e.g. in profitability). There are also indications of liquidity and solvency risks.
- It is prudent to hedge a company as much as possible against factors beyond the company’s control. This is especially true for international trade and unexpected currency fluctuations.
- Company growth should be kept at a sustainable level. Too much growth can seriously drain financial resources and even lead to bankruptcy. Systems and competencies must also keep pace with growth.
- Reasonable standards of manufacture should be followed. Products that do not meet the standard can damage or even completely destroy a company’s image.
- People are at the heart of any business and should be treated as such. However, people leave a company for a variety of reasons. Where appropriate, sensitive information must be protected by non-disclosure agreements and trade restriction agreements.
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