4 Types of Business Risk and Solutions You Can Take
Risk is impossible for us to avoid in any activity, including running a business. Risk is related to the presence of uncertainty which can ultimately cause harm to your business.
1. Strategic Risk
Strategic risk is one type of risk related to the strategy you use. This risk can arise due to immaturity or uncertainty of your strategy in running a business.
A strategy is needed and needs to be prepared carefully in running a business. Strategies also need to be applied when new competitors emerge that can threaten your business.
One example we can see in the case of Nokia smartphone manufacturers who take the wrong business strategy. Nokia considered failing to see an opportunity when they ignored the Android operating system made by Google, which was then just launched, and preferred the Windows Phone operating system made by Microsoft. While some of its competitors such as Sony, HTC, and Samsung chose Android as the operating system on their smartphones. As a result, Nokia suffered tremendous losses and lost a very large market share.
The solution to strategic risk is to develop a truly mature strategy. One step that can be taken is to conduct a SWOT analysis to find out the strengths, weaknesses, opportunities, and threats that might arise in the sustainability of your business.
2. Compliance Risk
Compliance risk is related to government regulations. In other words, this risk may arise due to your non-compliance with rules or regulations set by the government, both central and regional.
As we know, an area has the right, authority and obligation to regulate and manage its government affairs and the interests of local communities following statutory regulations.
For example, Aceh generally prohibits the trade in alcoholic beverages, so Aceh is not a strategic location for those of you doing business in that field. If you do not comply with these rules, you will feel the loss, because it is considered violating applicable law.
When running a business, you need to pay attention to the rules that apply. Learn which rules can rub against your business. Thus, you can minimize the risks that might arise due to these rules.
3. Operational Risk
Operational risk relates to everything that is involved in the company’s daily operations, for example, such as technical failures and personal problems. Technical failures include constraints on the website, problems with the server, and so on. While personal problems, for example, data input errors by employees, handling consumers who do not comply with SOP, and so on.
Operational risk may appear smaller than strategic risk which can even lead to bankruptcy. However, operational risks can also have a significant impact on the company.
Operational risk can be minimized, for example by using trained and professional human resources, or by improving the quality of existing human resources. You also need to revitalize aspects directly related to the company’s operational activities within a certain period, for example, every 3 months.
4. Financial Risk
Financial risk is a risk that may be faced by companies related to financial matters, such as experiencing losses or incurring extra costs due to certain reasons. The category of financial risk usually refers more to business cash flows that may cause financial losses.
One financial risk is debt. Having lots of debt, whether productive or non-productive debt, can pose risks to your business, especially if your business is unable to make a profit. Even large companies can experience this.
If possible, a company should not need to have too much debt. Then what if the company needs additional capital? You can do this by selling some shares, or finding new investors.
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