Why Assessing Business Risks
Business risks come in all shapes and sizes. This means that effective risk assessment must be adaptable to or uniquely designed for specific dangers. From financial risks, such as investments, to new market competitors, unwelcome threats permeate the business world and can pop up at any time.
Risk assessments are PREVENTIVE STRATEGIC TOOLS that can help businesses stay on top of adverse situations. They are designed to inform companies about the actions that need to be taken to plan for, and respond to, risks.
Types of Business Risks
- External Risks
External risks are those that originate outside of the firm and include economic trends, government regulation, competition in the market and consumer taste changes.
- Internal Risks
Internal risks affect far more specific and controllable processes. It can include employee theft, employee performance, financial risks, product recalls, etc.
The Most Common Business Risk Categories
- strategic –decisions concerning your business’ objectives
- compliance –the need to comply with laws, regulations, standards and codes of practice
- financial –financial transactions, systems and structure of your business
- operational –your operational and administrative procedures
- environmental –external events that the business has little control over such unfavorable weather or economic conditions
- reputational –the character or goodwill of the business.