This post is provided by Jason Dirkham.
Risk is a natural part of any business enterprise, even opening the business to begin with is a risk. Of course, there are methods to control that risk, for example, when registering as a limited entity, you confine your potential losses to that enterprise alone, so your personal assets can be protected in the event of failure.
That said, risk management is not just about protecting yourself, but the processes you use to develop your business. It may seem as though all risks need to be worried over for weeks and discussed at length before coming to a final choice, but the truth is that this would only limit the ability by which you could progress or develop.
In some industries, such as the insurance sector, taking so much time to make decisions about coverage plans and prices would be stifling and completely ruin your competitive edge. So, is it possible to automate risk management in your small business, and what tools may you even use to achieve that? With this advice, we’ll discuss that topic and provide some insights worth knowing:
Designing Risk Management Algorithms
You may be surprised just how many effective and worthwhile risk management algorithms can be used to sustain your business. For example, with a helpful tool such as Artificial, insurance providers can make certain that potential clients are provided an offer or not depending on the information they input and the supporting documents or credit check they provide.
This risk management tool allows you to set your essential definitions, and move forward, allowing potential clients to focus on fulfilling the sales lead themselves. Over time, that can ensure risk management is not just something you review semi-regularly, rather it’s an embedded part of your business process that isn’t afraid to turn down poor or potentially damaging opportunities for you.
Identify Your Risk Parameters
Of course, no risk is without its parameters. In many cases, certain risks are considered acceptable and worthwhile to handle, even necessary for progress. For example, it’s not uncommon for businesses to be quite vocal about social events like Pride month. Some might not appreciate that, and as we’ve seen, boycotts can occur. However, for certain businesses, being inclusive and welcoming to a large audience is more important, and worth the risk of alienating a select and vocal few. It’s a shame that this has to make clinical business sense to progress, but you can bet that even the biggest names in the industry have made that assessment. As time goes on, that push forward adopts a new norm, and ensures that the “risk” of taking stances like this dissolve over time.
Set Your Red Lines
Of course, no risk definition is complete without being absolutely sure of your red lines, where you know that a termination of a client relationship or the withdrawing of a potential partnership is essential. As we saw with Binance potentially overtaking the crypto giant FTX to help them survive, the moment they looked at their accounts and saw billions of crypto assets unaccounted for, they immediately pulled out of the deal and were quite vocal about doing so.
Red lines could be anything, from how many strikes a customer account has, if a customer account has been abusing your promotions (for instance, an IP address redeeming too many free trials for one user, yet with separate email addresses), or perhaps when you need to enforce debt collection recoveries by passing over the debt to a service that can pursue your old client. A red line allows you to gauge exactly where the rocks are, so you don’t sail into them and damage your firm.
Maintain A Clear User & Staff Policies
Communication helps to reduce risk. It’s why investing so much time and effort into training your staff isn’t just a good way to keep them at your firm, but to help them stop making mistakes. For example, new cybersecurity practice means never clicking on links sent my email addresses unless they’re valid and the URL is safe and recognized, never opening attached files, and discouraging public connection to your firm over social media so staff can be free and open without worrying about blowback.
The only way you can define those essential guidelines is by writing them out clearly in your user and staff policies, and even in the policies your enterprise uses to manage and review itself. Without those, you’re effectively flying by feeling, and that’s a quick way to take a wrong turn.
With this advice, you’re sure to automate risk management in your business in the correct manner.
