Risk is paramount in every business venture. The business decisions you make are a major risk that may
pan out well or go south. However, knowing how to analyze risk as an entrepreneur may help your
business avoid the unworthy risk that could hurt your business. Before we delve into the risk analysis
mechanism, we will give a brief background into what a business risk or risk is.
According to Patriot, risk comes with a benefit or loss that you may derive from making a business
decision. When such risk is a result of bad risk analysis, it may cause your business to be financially
sick, and in some cases could lead to the winding-up of your business. Thus, you must take
risk assessment seriously in your business.
There are two types of risk in entrepreneurship – Internal risk which is easier to control as it is within the
grasp of your internal control, and external risk, which given they are not easily within your reach you
may not have a direct influence over them.
There is no one-way approach how to analyze risk as an entrepreneur, however, the following risk
management strategies may assist:
1. Identify and document the risk
The first step in analyzing risk as an entrepreneur is to know the risks your business faces. These risks
might be internal based on staff experience or know-how (or lack thereof). Risks might be external,
and relate to competitors; ease of barriers to entry into the niche that you operate within; or
technology or government factors for example. Risk will be anything that has the potential to limit your
business operations, product or service delivery, or success.
You will also need to consider the extent of that risk. What are the chances that the risk will materialize?
How serious is the risk? Note down the gravity of the different risks that your business faces. Define the
risk and note the possible outcome, benefit, and/or danger of taking such a risk and the amount of
effect it will have on your business.
2. Monitor the risk and set up risk control
Monitor the risk. Assign staff to each risk so they can monitor and report it to you. A good risk-reporting
system is the right step in risk management.
After each risk is presented to you and the necessary steps have been taken to know how much risk
affects your business, put in place measures to control or mitigate those risks.
3. Review periodically
Just because you have successfully analyzed and controlled risks in the past does not mean such risks
may not occur again. Further, new risks might eventuate after the review of the previous risk
assessment. Therefore, it is pertinent that you schedule a periodic assessment of risks.
Risk analysis presents an entrepreneur with the avenue to know what threats face their business and to
develop possible ways to avoid those risks. If you aspire to be a successful entrepreneur, you should
always take risk analysis and mitigation seriously in your business.
References
- https://www.patriotsoftware.com/blog/accounting/small-business-risk-analysis-assessment-purpose/
- https://www.investopedia.com/articles/financial-theory/09/risk-management-business.asp#toc-
making-a-risk-assessment - https://www.mindtools.com/abhkwcn/risk-analysis-and-risk-management
- https://genesacpa.com/startup-101-how-entrepreneurs-can-assess-risk/
- https://www.entrepreneur.com/growing-a-business/5-ways-entrepreneurs-learn-to-manage-
risk/242977
