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How Your Startup Can Manage Risk More Effectively

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How Your Startup Can Manage Risk More Effectively

The word ‘risk’ is commonly used in the worlds of business and commerce, as it covers a broad range of issues and challenges that entrepreneurs encounter on a daily basis. Risk can also be particularly problematic for small businesses in the UK, which currently account for an estimated 60% of all private sector employment.

The fundamental nature of risk also varies from one business to another, depending on the industry that they operate in and the goods or services that they sell to the public.

In this post, we’ll identify the most common risk factors that small businesses and startups encounter in the UK, whilst asking how they can be mitigated successfully.

1. Building Risks

We’ll start with building risks, which pertain to your place of business and the employees who work there each and every day.

They also represent the most common type of physical risk, from the threat of fire or flood-related damage to the ability of your staff members to react appropriately in the event of an emergency.

In terms of the former, it’s imperative that you install strategically located fire alarms and smoke detectors throughout the building, whilst also ensuring that you have tailored insurance coverage based on the precise location of your premises and its purpose.

When it comes to the training of staff, a recent study by Virtual College suggests that startup may be at a considerable disadvantage. More specifically, it has been revealed that barely one-third (36%) of the population in the UK is first aid trained, whilst a further 40% are not interested in this type of training at all.

It’s therefore important that employers focus on providing this training to select employees as a key priority, whilst also ensuring that staff members know the location of all safety exits in the event of an emergency.

These steps can help to mitigate key building risks as your business scales, creating a safer and more compliant workplace in the process.

2. Operational Risk 

Operational risk is next on our list, and this refers to the ability of businesses to deliver goods and services to customers effectively.

In the case of product-oriented firms, this type of risk surrounds the supply chain and assembly of goods, which subsequently has an impact on operational costs and quality control measures.

For service providers, operational risk often refers to the deployment of labour and time, as you look to use your staff more efficiently, save money and boost your bottom line profit margins.

Operational risks are largely internal, so it’s important that you exercise your control as an entrepreneur and strive to minimise costs without compromising on the speed or quality of delivery. For example, land-based retailers can reduce their operational costs by transitioning online, as this business model typically lowers overheads over time.

3. Financial Risk

 Last, but by no means least, we come to financial model risk. This refers to the risk that your business will fail due to its numbers, including your sales, profitability and the recommended retail price of products.

This is why accurate financial projections are so important to startups, even those that haven’t had to secure funding from a third-party investor. The projections can help firms to mitigate their financial risk by informing achievable growth plans and driving manageable levels of investment.

Make no mistake; your financial planning lives and dies by the accuracy of your projections, so it’s important to include all of the costs that are associated with the operation of your business.

If you can combine this with accurate sales projections and a carefully cultivated price strategy, you can effectively estimate your annual profits and scale your business accordingly.

Not only does this type of planning mitigate risk, but it also affords your business the best possible chance of success regardless of the wider economic climate.

I am the founder of Startup Today. I am the main writer and have put in many hours of work into creating this blog. If you want to find out more about me then lets get in contact.

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