You might pose the question: is being too cautious good or bad for a company when it comes to harmful threats? There are a lot of different answers when it comes to big businesses and top leaders. On one hand, we have a former Intel CEO who promotes being aggressive even if there is just the slightest possibility of threat to the business. On the other hand, there are top honchos such as the owner of Virgin group who do not even worry about risks. For smaller companies though, it is a whole different scenario. In this article for the Manila Bulletin, Ruben Anlacan Jr. focuses on just this specific topic: how to manage business risks.
You may think that smaller companies tend to deal with much fewer business risks. Still there ARE risks to look out for. Here are some measures Anlacan Jr. provided for overcoming genuine threats:
• Insure against major risks. Unfortunately, no company has unlimited cash, so there is a need for insurance, but only for the crucial risks that cannot be absorbed.
• Use corporations or outsource. Since corporations have limited liability, you may choose to spin off a risky venture into another corporation so that losses would be limited. Another option is to outsource the risky option to a financially sound company that can shoulder whatever liability may occur.
• Have a sufficient cash reserve. As there are an infinite number of risks, you must have cash cushion to fall back on in case something occurs that you were not able to anticipate.
• Be prepared in case of disasters. Have off-site duplicate copies of critical documents, especially your receivables. Have not only the legally mandated safety requirement, but also invest in training your personnel so that they would know what to do during disasters.
It is usually the owner and top management’s job to manage business risks and perceivable threats – in large companies. For the smaller ones, there is less validation for being over fearful. But certainly in both cases, simple preparedness and foresight are needed to avert situations becoming even much worse. To avoid misapplication of resources and ensure that the budget on the counter measure must be less than the potential loss from the risk, a better solution is to have studies beforehand on what exact risk management strategy is applicable to each situation in any company, big or small.
Read the Original Article: http://www.businesscoachphil.com/how-a-small-company-deals-with-risks