Your First Step towards a Resilient Business: Assess & Manage Risk Exposure

Starting a business is not easy. A lot goes into building your dream business - a solid idea, the right business model, the right dream team, and the right approach.

But often, we end up missing out on the potential risks. This is where reality hits. So, apart from having the right business plan, you need to understand the risks you might face. After all, assessing your risk helps you -

• Make informed decisions
• Be more prepared for adversities
• Gain a competitive advantage over competitors
• Achieve sustainable long-term growth
• Manage compliance regulations in a more innovative way
• Achieve operational efficiency

All in all, making your business resilient!

That being said, here’s how to assess risk exposure!

Step 1 - Identify the Risks and Classify Them

The Numero Uno step in building a solid business is to identify internal and external risks. These could be operational inefficiencies, cybersecurity risks, compliance gaps, and regulatory changes.

For this, you can use several methods and tools - SWOT analysis, stakeholder interviews, audit reports, brainstorming, documentation review, incident logs, and more.

Once you identify them, classify them into financial, operational, compliance, and other risks. Next, create a risk register for your future reference.

Step 2 - Determine the Probability of These Risks

Use qualitative and quantitative ways to determine the risk likelihood and classify them as high, medium, and low.

Step 3 - Analyse the Impact

Now this is the potential consequence of the risk. You should express it in terms of costs, as it gives your stakeholders a clearer understanding of the potential loss or gain.

Step 4 - Calculate the Risk Exposure

Use this formula -

Risk Exposure = Likelihood x Impact

For startups, risk exposure is the expected loss from the risk. This number will help you prioritise risk mitigation strategies and deal with the risk accordingly.

 

The Next Plan of Action!

Once you have calculated the risk exposure, you need a plan to mitigate these risks. For this, you need to -

1. Prioritise Risks - Rank the exposures and create risk profiles.
2. Develop Risk Treatment Plans - Avoid activities causing the risk and implement controls to lower the impact. Also, get business insurance that lets you bundle up insurance policies as per your business requirements.
3. Implement Controls and Plans - Build solid defences, create strong incident response, disaster recovery, business continuity plans, and, of course, record your assessment.
4. Monitor and Review Continuously - Track the risks from time to time and review your plan of action regularly. Also, make risk management a continuous business approach.

Determine the risk and create a solid plan of action to build a solid and sustainable business!