In big business risk assessment is a highly important process to go through to try to make sure that you aren’t going to make any serious mistakes that could end up costing your business thousands of pounds or even leading to its downfall. As such many companies will have in-house risk assessment departments, or will combine it with their project management teams to make sure that they can reduce risk wherever possible and choose only the courses of action that have the best prospects in terms of return and things going smoothly.
But when it comes to smaller businesses – to individuals and entrepreneurs, sometimes risk assessment gets forgotten and we instead begin jumping in with both feet when we decide we want to try something new. Or alternatively, and arguably more seriously, we will come up with a business plan but then be too afraid of the risk to ever give it a go – opting instead to stagnate or to continue living without ever fully realizing our dreams.
Risk is an integral part of business though, and it applies to every organization or model whether it’s a huge conglomerate or just you typing in your pajamas with a cup of tea. Here we will look at how to manage risk wit applies to smaller business on a more personal scale.
Counter factual simulation is a self-help technique that you can use to test the potential outcomes of your plans. Here then, rather than just giving up your day job and hoping it works out, or being too paralyzed with fear to ever do so; you will instead take some time to just sit down and really imagine what doing so would entail. Where would you get the money for food, and what would be the worst case scenario if it all went wrong? By imagining what would actually happen you can often successfully eliminate the fear and intimidation you felt, or you can see where the plan needs to be modified.
Your risk is based around the potential things that could go wrong of course, and so it’s important to be aware of these but also to have a plan to deal with them if necessary. That’s precisely what contingency plans are – course of action that you can take to limit the damage. For instance if you’re thinking of asking for a raise from one of your clients, then what is your contingency plan in case that goes wrong and you end up losing them? Where could you find more work quickly?
Avoid Unnecessary Risks
While risk is an important part of business, there is nothing to be gained from taking unnecessary risks and putting yourself in jeopardy when you don’t need to be. When you make your plan of action then, make sure to make it as water tight as possible to try to avoid problems – which means taking as much time as necessary to plan every last detail and investing in corporate lawyers, accountants and consultants to make sure that you have as much going in your favour as necessary.
How Much do You Want it?
Ultimately though for an individual entrepreneur the risk often won’t matter as much as the alternative of not taking it. If going it alone is your dream or you’re not happy in your job, then sometimes it’s best to just throw caution to the wind and to take a chance.
The article is shared by business blogger, Stephen Corris.