Businessdictionary defined risk as “a probability or threat of damage, injury, liability, loss, or any other negative occurrence”. In short, risks are factors that can affect a business’ ability to operate.
For that reason, it is crucial for every business to identify, analyze, and avoid risks; minimize their impact, or at least cope with its effects and recover. These actions, when done systematically, can be defined as risk management.
Risk management includes several related actions, including risk identification, analysis, handling, and monitoring. It is extremely important for any business – regardless of its size and nature – to follow and execute a detailed, holistic, and dynamic risk management strategy in order to achieve business continuity and remain competitive in the market for the long haul.
Identifying risks involve classifying them into two general categories: internal and external risks. Internal risks are faced by a business within its organization while external risks occur outside a business’ corporate structure.
Internal risks include human-factor, technological, and physical risks. Human-factor risks, otherwise known as personnel issues are health, safety, retention, and management concerns within a business’ workforce.
Technological risks are equipment and resource concerns that may affect the production, delivery or distribution of a business’ product or service. Physical risks, on the other hand, are loss or damage risks to the assets of a business.
Moving on to external risks, they include economic risks, natural risks, and political risks. Economic risks are macroeconomic conditions that may affect a business’ financial status while natural risks are calamities that may cause damage to a business’ property.
Political risks, on the other hand, are changes in government policies that require adaptation and compliance.
The key difference between internal and external risks are their predictability and manageability. Since internal risks occur within a corporation, businesses have a better chance of foreseeing and reducing them.
Nevertheless, there are no grounds for complacency. Both risks should be addressed before they transpire and get detrimental. Failing to manage business risks effectively may result in large expenditures, bankruptcy, and in worse cases, litigation.
Today, four out of twenty-nine widespread business risks are technological risks. According to the 2017 Executive Opinion Survey from the World Economic Forum, cyberattacks, data fraud and theft, misuse of technologies, and critical information infrastructure breakdown are among the global risks of highest concern for businesses.
These technological risks are best addressed by switching to updated technologies and software systems since it is already given that hackers are lurking everywhere.
Aside from providing better cybersecurity, updated technologies also increase the productivity and competitive advantage of a business.
Having that said, here are the key takeaways of the infographic from Bizprac which details 10 ways your business could be at risk:
- Natural disasters
- Health and safety risks
- Non-compliance with regulations
- Regulatory and government policy changes
- Security risks
- Cyber risks
- Economic and financial risks
- Loss of competitive advantage
- Utilities and services
To learn more about this topic, check out the infographic below.