How aware of risks to your business are you, and have you taken steps to manage risk and ensure the long-term success of your business? Many business owners are convinced they have and are aware of risks, but in an ever-changing landscape the risks of competition, market conditions, technology, and emerging industry disrupters can pose existential threats.
In some way, all risk is financial — whether that is loss of revenue or increased costs — and it is this kind of risk that companies are most zoned in on. However, the businesses that neglect the broader risks are ironically the ones most likely to suffer from financial loss.
The risks that your business and employees need to be aware of are more complex than just financial. They are strategic, operational, and reputational risks.
Failing to anticipate market shifts or adapt to change is the result of poor strategy. If the post global recession reality has taught business anything, it is that no company is too big to fail and poor strategy will always be punished. If you’re not sure that you agree, just look at what has happened to Blockbuster, Nokia, Borders, BlackBerry, SunMicrosystems, and Kodak to name a few businesses that have suffered from a lack of strategic vision.
Risk is good
Risk is a word with negative connotations, but when it comes to strategic risk it can actually be a huge positive. Strategic risk forces you to innovate and often the greatest source of innovation is within your own company. Utilise this free source of innovation by creating internal project teams and encouraging initiative and creativity, both internally and externally.
Look outside of your own employee pool as well and think about supporting or collaborating with start-ups. These relationships can take many forms and whether it’s a mentoring or financial relationship, it’s possible you’ll be helping create your next acquisition.
Don’t be afraid of encouraging individuals and start-ups that could become your future competition, as it can actually be quite healthy. In the 70s, a Kodak engineer developed a digital camera, but rather than pursue this invention and drive it to market they buried it as a threat to their core business of film. Sometimes it’s better to work with your competition to change your industry than let it change around you and find yourself obsolete — Kodak surely realise that now.
Take a look inside
Collaboration should not be the exclusive domain of external partners; internal collaboration should be the new foundation of your business. Much can be learned about improving processes, by simply bringing employees closer together. For example, marketing can help IT better understand technology developments, fostering discussion around what is possible from an IT perspective and helping fuel creativity. This comes down to understanding operational risk.
Aside from missed opportunities arising from poor internal communication there are physical risks like server, power, or telecoms failure, employee absences, and supply chain delays. These are things you are probably already on top of, but what about inhibitive processes that threaten your reputation and profits?
Are you regularly conversing with shop floor employees to identify areas for improvement? How open is your management structure to change and suggestions? Do you encourage your employees to share ideas with their managers and also those managers to pass them on to the executives?
So many good ideas go to waste because employees feel they won’t be listened to or middle management doesn’t pass it up the ladder. It is the job of senior management to have the vision of how great ideas can practically be implemented, so it’s important that you see untapped internal knowledge or ideas as an operational risk.
You also need a culture that is comfortable with change and adaptation, as this will keep you ahead of your competitors when market shifts occur. This starts with creating that culture at every level and recruiting the right people.
Watch your reputation
Operational risks can become reputational risks and loss of reputation can be hard to come back from. It’s not just about how your customers see you, but how your employees and potential employees see you. These are the people who will identify risks on your behalf, who will recognise or even create the very technologies that could be a threat to the survival of your business.
Now, more than ever, businesses need to be aware of these risks. Developing processes to understand what your competitors are doing, what your customers are thinking, and what innovations are being developed in your industry has never been more crucial to survival.