Risk Management – ​​10 Risk Minimization Tips

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:

  1. 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.
  2. It is advisable to have alternative supply chains (including suppliers and distribution channels). Good relationships must be established with all relevant parties.
  3. Debt helps businesses grow. However, having too much debt can be dangerous and should be kept to manageable levels.
  4. Being dependent on one or a small number of clients can be very risky and should be avoided whenever possible.
  5. 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.
  6. 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.
  7. 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.
  8. 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.
  9. Reasonable standards of manufacture should be followed. Products that do not meet the standard can damage or even completely destroy a company’s image.
  10. 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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Wim Venter