Risky Business and Five Areas to De-Risk

In the past year, most businesses have taken steps to “hunker down” and be a survivor.  Many businesses are taking the opportunity to strengthen themselves to emerge stronger when the economy fully recovers.

risky_business-300x213De-risking your business is a simple framework that can be used to analyze your business and adjust your execution plan.

Five Areas to De-risk

1. Operational Risk – Reduce fixed costs, which is also known as operational leverage.  Identify efficiencies, work flow automation and other ways to boost productivity.  Put processes in place so your business is not dependent on individuals.  Ensure that operational controls and approvals are in place for spending.

2.  Market Strategy Risk – Focus on your core business, which is presumably the most profitable and stable.  What can you do to improve service and value without increasing costs?  Be active in your business.  Sit down with your customers to understand their needs and how you can do a better job of serving them.

3. Business Interruption Risk – When times are good, you might be able to absorb losses from a business interruption due to catastrophic event,  system failure or even malicious employees.  Now is the time to make sure that your operation is tolerant.

4. Data Security & Compliance Risk – Now is not the time to experience data loss or compromised data security.  Reduce the risk of loss of critical business information and the risk of violating privacy regulations such as PCI and HIPAA by ensuring that audit, governance, backup and recovery, and security policies are in place.

5. Financial risk – What amount of debt can your business support?  Reduce debt load if possible. Refinance short term lines of credit to longer term notes.  Know the cash flow requirements of your business in both the best case and worst case scenarios.

Notice that I mention financial risk last.  That’s because you cannot understand the financial needs unless the strategic and operational plans are in place.

And remember, if you can’t transfer, reduce or eliminate your risk…then by default you accept the risk.

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