It is everyone’s dreams to start their own business. The idea of becoming your own boss is irresistible, choosing where to work, when and how it is a wish that everyone wants to be granted. Isn’t it romantic being in charge of your destiny? Well, why don’t we have everyone doing it? This is simply because it is risky. As an entrepreneur risk is a part of the day to day activities and you need to get used to risk in order to be successful. Every business is a risk and every decision made has some risk associated with it too. So what are some of the risks that a business faces?
Physical business risks
These are risks such as premises, employees, and assets. Common risks
associated with this include water damages, fires, theft of properties, or vandalism. This can result in a business incurring extra costs like repairing costs, item replacing costs and legal cost if found liable. Auto Towing in San Francisco is a good example of a company that has tremendous physical risks. They have over twenty employees and even more tow trucks. There is a tremendous physical risk with this type of business at this scale.
Human business risks
The human resource on your business can create risks in a number of ways. For instance, employees might be non-compliant or incompetent. Also, the behavior outside the workplace can bring impacts on the business e.g. when employees engage in alcoholism and drug abuse the production of your business will be affected. The business must protect itself from all these.
Technology risks
Some of the risks that a business faces are due to technology failures. For instance, software and hardware failures, cyber-attacks, data breach, malware attacks, and power outages can cause a great loss in business.
Financial risks
There are several ways which a business can encounter a financial risk. The factors may be external or internal. The external factors may be fluctuations brought about by the financial markets and government policies. The internal factors can be such as the clients refusing to pay the debts owed and poor financial planning. The financial risks can lead to negative cash flow and if it persists, it can lead to the end of a business.
Compliance risk
Every business must be governed by the set regulations. Failing to adhere to the rules and policies can lead to compliance risks which involve hefty fines, prosecution and even termination of the business.
Still, have time for more reading? Check out our interesting article on financing options for a business.