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How do I prevent risky situations from occurring in my business?

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Shenuka Wickramasinghe, Business Advisor at Square One August.27.2018

Starting a business begs the question

“how do I mitigate risk?”

The fact is your business will always have some level of risk. Entrepreneurship is synonymous with risk. The key to mitigation is preparedness. Before selling your products or services, you need to decide if the level of risk involved is worth the potential profit.

First, think about all the worst case scenarios and what kind of impact they would have on your business.

  • Chances are you’ve already thought about potential problems. Remember to not only think of your own potential mistakes but those of others like employees, suppliers or customers.

Now think about the likelihood of each scenario happening.

  • Are you scenarios realistic? Does the customer take on a certain level of risk by simply using your product or service? (Power tools, rock climbing, children’s toys)

Now, think about how you can reduce (mitigate) the level and likelihood of each scenario.

Example: If you are starting a Bed and Breakfast there is a risk that your house will burn to the ground, and the impact would be extremely high, but the likelihood of this happening is probably very low. You can mitigate this risk by ensuring that your building structure is up to code, you prohibit the use of candles and outdoor fires, and that you check smoke alarms on a regular basis.

Once you have created a list of scenarios and your own risk mitigation plans, talk to a lawyer and insurance provider to receive additional legal documentation and insurance. Professional services provide validation and extra resources to your risk mitigation plans.

While is it important to analyze risks, don’t let the potential of risk paralyze you. Focus on your developing sound products and services that are of quality and value to your customers. Ensure your customers are aware of the potential risks (in any) of using your products or services. Using a lawyer and an insurance provider will alleviate the inevitable stress and risk that comes with running a successful business.

Learn more about our Ask an Expert Program where you can speak to a Lawyer, Accountant, Business Planner or Marketing Professional for only $20.

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