Business Planning

What Is Risk Management? – Find Out How To Manage Risks in Business

Soumava Goswami

Business Planning September, 09 2023

What is risk management? – Simply put, it is the process by which businesses identify, assess, and control the various risks that threaten the growth, capital, and earnings of the organization. The risks for the organization can come from a variety of sources, both internal and external. These can be financial problems, legal problems, management errors, accidents, tech issues, economic problems, disasters, and many more.

In this article, you will learn about risk management in general and will get a good understanding of its essentiality in business. Furthermore, you will also learn the importance of risk management and how it can shape a business. Finally, we will share with you some of the best practices of risk management, with the help of which you can ensure a proper risk management system in place.

What Is Risk Management?

According to IBM.com,

“Risk management is the process of identifying, assessing and controlling financial, legal, strategic and security risks to an organization’s capital and earnings. These threats, or risks, could stem from a wide variety of sources, including financial uncertainty, legal liabilities, strategic management errors, accidents, and natural disasters.”

Risk management is important for situations when an unforeseen event (internal or external) pushes the organization into a threatening situation. It can also be an economic situation where an unexpected surprise in the market can heavily impact your business. Hence, having a risk management framework for your business is really essential.

The risk management framework will help you mitigate the risks in a better manner. Even if the risk affects your business, the risk management system will enable you to deal with that risk better.

External risks are out of your control, and you cannot do a lot to receive the impact of the risks. However, you can do many things to stop and mitigate the internal risks for your business. You will need to anticipate and prepare for the risks, despite the size of the business or the level of impact of the risk in the business.

Why Is Risk Management Important?

According to Investopedia,

“Risk management has always been an important tool in running any business, particularly when a market experiences a downturn. In any economic environment, an unexpected surprise can destroy your business in one fell swoop if you don’t have the right risk management strategies in place to prevent, or at least mitigate, the damage from that risk.”

There are many risks that have enough potential to destroy the business and its operations. Hence, as a manager or CEO of the organization, you will need to identify what are the risks that pose threats to the operations of your business.

It does not matter whether the business is a startup or an established one. Risks can impact the business a lot. Even if a risk starts impacting a business, a business that is well-prepared can minimize the impact of the risk on the business’s earnings. With the impact of the risk, the business can also lose a lot of time, productivity, and even customers.

Hence, the identification of the risks of the business should be a key part of the business’s strategy and planning. You can identify risks in a number of ways once you implement a proper risk management system in the organization. What strategies you will employ to identify those risks should rely on the specific business activities of the company.

What Are The Best Ways To Manage Risks?

Having a proper risk management system in place is one of the major necessities. However, people still have their own biases.

According to Harvard Business Review,

“Multiple studies have found that people overestimate their ability to influence events that, in fact, are heavily determined by chance. We tend to be overconfident about the accuracy of our forecasts and risk assessments and far too narrow in our assessment of the range of outcomes that may occur.”

Here are the steps that you will need to take to ensure that you have a proper risk management system in place:

1. Risk Prioritization

If you have multiple risks, prioritizing the top ones will help you to deal with them as per their impact and possibility of impact.

2. Having A Business Insurance

Once you purchase insurance, you are transferring the risks of the company to insurance companies. Furthermore, you are not paying a lot of costs.

3. Becoming An LLC

If you do not want to be personally liable for the debts of the company, change your company’s structure to a Limited Liability Company (LLC) or a Corporation.

4. Quality Assurance

Quality assurance of products and services will help your business in increasing its reputation. Ensure to test them before customers purchase them. This will allow you to make all the necessary adjustments beforehand. Also, ensure that your testing methods are foolproof.

5. Get Away From High-Risk Customers

Implement a policy in your organization that the company will not entertain customers with poor credit. Even if the company deals with them, the customer must pay ahead of time. This shall lower the complications for the business in the long run.

6. Growth Control

Training your employees is of the highest importance here. To sell your products and services, if you set big goals for your employees, they shall be tempted to take uncalculated risks. This can make things go wrong and damage your company’s reputation.

7. Risk Management Team

Apart from paying an outside company to manage the risks in your business, consider having a risk management team of your own. To do this, you can appoint some of your current and experienced employees to work in risk management.

Final Thought

What is risk management? – Risk management basically creates insurance for the company from within and is really important to ensure the success of the organization. If you want to implement a system within your company, consider following the aforementioned steps.

To shape a better strategy for your business, you will need to get a better idea of the business and the industry by diving deeper. Do you have any more recommendations regarding better risk management strategies? In that case, consider sharing your thoughts and views with us in the comments section below.

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Soumava Goswami

A passionate writer and an avid reader, Soumava is academically inclined and loves writing on topics requiring deep research. Having 3+ years of experience, Soumava also loves writing blogs in other domains, including digital marketing, business, technology, travel, and sports.

6 Common Mistakes To Avoid When Hiring A Workplace Cleaning Company

A fresh and well-maintained workplace can improve the mood and productivity of your employees. However, it’s not that easy to maintain a clean work environment. When the day is hectic, it’s impossible not to make a mess.As a business or property owner, the best thing to do is hire a professional cleaning company. Hiring a professional cleaning company is as important as running the 10 panel drug test for new recruitments. Why Hire A Cleaning Company? You could be contemplating whether hiring a professional office cleaning company is worth it. After all, you also have the option to hire employees who can handle cleaning duties instead. Plus, some businesses utilize a chore chart to delegate cleaning duties to their employees on a regular basis. So, what's the point of hiring a professional cleaning service? One significant benefit of hiring a workplace cleaning service is that you don’t have to screen and hire your own cleaning staff. This saves you a lot of time, effort, and resources. Additionally, you don’t even have to provide training since the cleaning company will take care of that. With a cleaning company, you’re assured that the cleaners you get are skilled, professional, and well-equipped to handle any kind of cleaning or disinfecting job. Moreover, you don’t have to worry about buying vacuums, mops, and any other cleaning equipment since professional cleaning companies can provide them. Common Mistakes To Avoid When Hiring A Cleaning Company Hiring a cleaning service is advantageous for both employees and the company. However, because of time constraints, most businesses make mistakes in choosing and hiring a cleaning company. The following are the most common blunders companies make when choosing a cleaning service and how to avoid them: 1. Failing To Check Licenses And Certificates There are plenty of fraudulent companies out there. Many businesses end up hiring cleaning companies that don't have the right paperwork, licenses, and certifications. Because of this, the cleaning staff and service they get are unsatisfactory. What Should You Do: Double-check the company's certificates and licenses. Inquire about their insurance, experience, expertise, certification, and licensing. In the end, hiring background cleared cleaning services will ensure you only get trained and well-equipped cleaning staff for your workplace. Aside from getting superior cleaning services, you don’t have to worry about possible theft and damages caused by ill-intentioned cleaners. 2. Neglecting To Read And Fully Understand The Service Contract An agreement cannot be deemed void simply because one party did not read or comprehend it. As a business owner, you know how important it is to have a service agreement with another company. Both sides need to know what their responsibilities are and what they can expect. If you don't know what's in the contract before signing it, you're at a disadvantage, specifically if a problem arises while the agreement is in effect. What You Should Do: Make sure to read the agreement and understand everything in it. Look for parts of the contract that talk about the cleaning service's scope as well as the company's involvement when accidents, loss, and other kinds of damage occur. Be sure that the payment terms, completion date, and other specifics of the cleaning service are all laid out in the contract. Lastly, don't hesitate to express and share your concerns if some terms and provisions are unclear. Communication is essential in every business relationship. 3. Hiring Low-Priced Cleaning Services As a business owner, you're used to looking for ways to make more money and cut costs. But when it comes to finding the right cleaning company, cheap doesn't always guarantee better services. Not all low-cost cleaning services are guaranteed to do a good job. So, instead of saving money, you wind up shelling out extra cash to hire another cleaning company to redo the job until you're pleased with the results. What You Should Do: Consider the cleaning service your company needs, and plan accordingly. Then, get estimates from several cleaning companies so you can evaluate their services and prices. From that, you can choose the best cleaning service that suits your business needs and budget. As a business owner, you may not have sufficient time to keep your office clean and tidy 4. Disregarding A Cleaning Service's Specialization Not every cleaning company is the same. Some can offer highly specialized cleaning services while some cannot. Some cleaning services focus on specific industries, such as hotels, factories, and restaurants. What You Should Do: Take the time to conduct research. The time and effort you put into research will pay off. You can easily find a cleaning service's specializations by visiting their company website. This is important, especially if you’re in the food and retail industry. Restaurants, groceries, and shops have to be cleaned and disinfected more thoroughly than a regular office establishment because the health and safety of customers are a major concern. 5. Skipping Reference Checks References can attest to a cleaning firm's dependability, competence, and expertise. Regardless of what kind of services your company needs, asking for references is a great way to learn more about the services and standards of a cleaning company. This is also a fantastic way to determine whether and how problems were resolved if a past client had any problems with the firm. This information might reveal whether the organization is dependable and professional, especially under difficult circumstances. What You Should Do: Conduct a reference check by calling the cleaning company's previous clients to learn about their cleaning skills and level of service. Check the company's website or social media accounts for client feedback and comments. If you can personally locate some of their clients, it is best to reach out and ask them for their thoughts about the company. 6. Rushing Decisions You might be in a rush to find a cleaning service so you can get back to running your business. However, picking the best cleaning service isn't something that should be rushed. It's important to carefully select a professional and reliable cleaning service for your company as they'll have access to your premises, valuable technologies, and office equipment. What You Should Do: To avoid making hasty decisions, you don’t have to hire a cleaning company right away if it’s not that urgent. If your workplace just needs general cleaning and maintenance, you may enlist some of your employees and give them additional compensation for agreeing to perform some cleaning duties. But do remember that this should be a temporary arrangement. Eventually, you need to hire a professional cleaning company for your workplace since most employees won’t like performing duties that are outside of their job description. Final Thoughts As a business owner, you may not have sufficient time to keep your office clean and tidy. After all, cleaning the entire workplace is a difficult undertaking that demands both expertise and consistency. But since your employees deserve to work in a clean and sanitary workplace, the best solution is to hire a professional cleaning company that provides trained and professional staff, along with reliable cleaning equipment. Additionals: Top 5 Types Of Businesses That Are Giving More Profits To The Sellers

Ways to Attract More Customers to Your Pool Business

Owning a pool business can be a rewarding venture, but attracting and retaining customers is crucial for long-term success. With the right strategies in place, you can create a thriving pool business that attracts customers year-round. In this article, we'll explore proven strategies to help you attract more customers and grow your pool business. Enhance Online Presence In the modern era, establishing a robust online presence is imperative for the success of any business. Start by creating a professional website that showcases your pool services, facilities, and pricing. Ensure that your website is mobile-friendly and optimized for search engines to improve online visibility. Utilize social media platforms such as Facebook, Instagram, and Twitter to engage with potential customers, share updates, and promote special offers. Offer Special Promotions and Discounts Attracting more customers to your pool business can be achieved by providing special promotions and discounts that they can enjoy. Everyone loves a good bargain, so this is a great way to entice them to choose your business over others. Consider introducing seasonal promotions such as early bird discounts for summer memberships or holiday specials. Provide referral incentives for existing customers who refer new clients, such as discounts on future services or complementary pool accessories. Additionally, offering package deals or discounts for group bookings or events can help attract larger groups of customers. Host Events and Activities Hosting events and activities at your pool facility can attract new customers and keep existing ones coming back for more. Organize poolside events such as pool parties, movie nights, or fitness classes to create a fun and engaging atmosphere for your customers. Partner with local businesses or organizations to host joint events or promotions, such as a poolside barbecue with a local restaurant or a fundraiser for a charitable cause. Offering swimming lessons or water safety courses can also attract families and individuals looking to improve their swimming skills. Provide Exceptional Customer Service Providing exceptional customer service is key to attracting and retaining customers in any business. Train your staff to deliver personalized and attentive service to every customer, greeting them warmly and addressing any questions or concerns they may have. Respond promptly to inquiries, complaints, and feedback to show customers that their satisfaction is your top priority. Consider offering added amenities such as complimentary towels, sunscreen, or refreshments to enhance the customer experience and set your pool business apart from the competition. Implement a Referral Program A referral program can be a powerful tool for attracting new customers to your pool business. Incentivize existing customers to refer friends and family by offering rewards or discounts for each referral. Create referral cards or codes for easy tracking and redemption, and make sure to thank customers for their referrals with personalized messages or exclusive offers. Encourage satisfied customers to leave positive reviews and testimonials online, which can help attract new customers and build trust in your pool business. Highlight Specialized Pool Designs A great way you can attract customers to your pool business is through showcasing your unique and innovative pool designs. Moreover, you can also showcase your special installations like infinity edges, vanishing edges, unique tiling, or special water designs. If you highlight these features, you will see that your pool business will attract more customers in the long run. Moreover, make sure these new designs and innovations are showcased on your pool business’s website, social media platforms, and to potential clients. This is done to attract customers to your pool business for your exquisite designs. We suggest that you make use of the spotlight on your unique designs that will set your pool business apart from other competitors and attract more customers. Collaborate With Local Influencers If you want your pool business to flourish, then you must collaborate with local influencers to boost exposure to your business. They will allow your pool business to flourish by posting pictures and testimonials featuring your pool designs, which will be communicated to thousands of viewers on social media. This is a win-win situation for you as a business owner and them as a social media influencer. Leading to more customers in your pool business and also allowing the influencer to gain some more likes and followers. Moreover, this strategy will not only improve your pool business but also improve your online presence, which is a must-have strategy for modern businesses to flourish in the digital age. We also advise that you create long-lasting relations with the influencers to have a better buzz around your pool business. Showcase Customer Testimonials Having happy customers is the best way to have your pool business flourish. Happy customers are also the best marketing assets you can have. Sharing their testimonials on your website and social media pages will go a long way in building trust and credibility with your potential customers. Make sure you highlight their positive experiences and showcase to them the beautiful pools that you have built or renovated to serve them. By sharing true customer experiences, you will foster trust among your potential customers and inspire them to take your pool business into their next consideration. Implement Geo-targeted Advertising By using geo-targeted advertising, you will be able to focus on your marketing efforts to your potential customers in specific locations. This will help your pool business increase efficiency on the capital that you might make use of to attract customers. Additionally, it is also crucial that you target your local customers first before expanding to regional advertising. As said by many seasoned business owners, having a local customer base always allows the business to flourish in the long run. We think by smartly allocating your marketing budget towards hyper-local advertisements, you will be able to effectively target the customers you are seeking to attract to your pool service. Conclusion Attracting more customers to your pool business requires a combination of creativity, consistency, and exceptional customer service. By enhancing your online presence, offering special promotions, hosting events and activities, providing exceptional customer service, and implementing a referral program, you can attract new customers and grow your pool business successfully. Implement these proven strategies today and dive into success with your pool business. Read Also: Business Continuity Plan – What Is It, And How Does It Work? Upcoming Business Challenges In USA For Small Businesses To Note

Importance Of Capital Goods – What Role Does It Play In The Industry?

Do you want to know whether the Capital Goods are the future or a threat to future investment? If yes, you have to understand the reality of Capital goods before drawing any conclusion over it. You must know some of the fundamental aspects of Capital goods before understanding their functions and importance in the Industry. Without knowing the basics, you cannot draw any conclusions about it. Without an adequate supply of Capital goods, Industry cannot grow on the right track. Therefore, you must possess the correct amount of capital goods to increase the chances of your business growth. What Are Capital Goods? The physical assets of a company that is used in the process of production by a company are known as Capital goods. The consumers will use all these products and services produced by the company using these goods. Different forms of capital goods are equipment, machinery, tools, and buildings. Most importantly, they are not finished products; instead, they are used to prepare them. Importance Of Capital Goods Capital plays a vital role in the modern productive system. Without the use of Capital, you cannot be able to run your business successfully. Therefore, every essential aspect of your business is dependent on the application of capital goods. Also Check: Canned Packaged Goods: Everything You Need To Know 1. It Is Essential For Production Without capital, the production of goods and services is hard to imagine. However, nature cannot provide you with all the furnished goods and services to human beings. Machinery for farming, mining, forestry, and ashing can make things easier and more effective for your production process. However, if a man has to work with his bare hand for agriculture, then productivity will be low. Even in the primitive age, the application of the tools was there for plowing the agricultural field. In the modern age, the application of sophisticated machines has made people's lives more accessible and has increased the rate of efficiency. 2. Enhances The Productivity With the enhancement of technology and specialization, the application of capital goods has become much more important than before. Therefore, within a limited time, more goods can be produced. It's like machinery has made the life of the people easier today. In addition, extensive use of capital has made the USA one of the strongest economies in the world due to the high productivity rate. Many developed countries of the world today are primarily dependent on Capital Goods. So you have to make your choices in the correct direction while improving your business. 3. Importance For Economic Development In the process of economic development, capital occupies a central role. This is because the core of economic growth is capital accumulation. A country’s economic development is solely responsible for the usage of capital goods. Roads, railways, airports, harbors, and other essential facilities we use today are part of the capital. Economies of the USA, Russia, And China are developed because they have a high amount of capital to build their economy. Without the application of Capital goods, no economy can flourish in the long run. 4. Creates Employment Opportunity One of the vital roles of Capital goods is creating employment opportunities in any country. Therefore, creating employment opportunities in a country increases when you use Capital goods. Therefore, employment generation is the actual cause for which its use is crucial. It creates the employment opportunity in two ways or, better to say, in two stages- Firstly it creates employment opportunities when workers are hired to produce the machinery, which will help construct dams, roads, and railways. Secondly, workers will be required to handle the machinery for producing the finished products using the capital goods. Many factories will crop up in completing the dam projects, and many people will get employment opportunities. Thus, the capital formation can increase the chances of employment generation in a nation. First, however, you have to understand the ways before using capital goods to develop your nation's economy. 5. Helps To Convert Raw Materials Into Finished Products No factories in the world can flourish only with adequate raw material. The sales of an organization will increase when with the help of machinery, a company's raw materials will be converted into finished goods. Only by selling the finished goods, the asset side of the balance sheet shows a better figure for the organization. Therefore, the profitability of an organization is heavily dependent on the use of Capital goods. You have to understand the co-relation between Capital goods and their usage in modern-day business. Then, proper planning with the help of adequate execution can make things simpler for your organization. Also Read: Boxed Packaged Goods: The right Guide To uplift Your Business Functions Of Capital Goods There are several functions of Capital goods that many of us are not aware of in the correct order. Some of them are as follows:- It ensures an adequate supply of raw materials for your business. The supply of appliances and heavy machinery can help you increase your production level. Capital goods provide the means of subsistence to the workers. You can enjoy the provision for transportation like Railways, motor trucks to make the supply of your products and services smoother. Employment creation and employment generation for the workers increase when you use capital goods. Thus, capital goods form a vital part of the economy that you cannot ignore at your end. You have to admit the importance of Capital goods in your life. Developed countries of the world have focussed on Capital formation first to develop their economy. Final Take Away Without applying capital goods, no economy can prosper in the long run. Therefore, developed economies of the world make extensive use of the capital to improve their economy to the next level. You can share your comments and opinions if you feel that my opinion is correct. For example, today, the demand for Capital goods has increased due to increased orders. If your company has a higher capital margin, then the chances of the growth of your organization increase. You have to understand the facts before deciding to invest in Capital goods. More Resources: Should You Buy GMER Stock? Everything You Should Know Should You Buy GS2C Stock? Everything You Should Know Is PHI Stock A Good Buy? Everything You Should Know

What Is A Sales And Purchase Agreement For Business? – Let’s Find Out

A sales and purchase agreement for business is a binding legal contract that consists of conditions both the buyer and seller of a business or property agree upon. In any sale process, it is one of the main legal documents. It basically sets out the elements that are agreed upon in a business deal. It also consists of the number of protections of both parties as well as the legal framework for the completion of the sale. In this article, you will learn about the sales and purchase agreement (SPA) and some of its general details. Apart from that, you will also learn about how the sales and purchase agreement works for businesses. In addition to that, we will also discuss the major constituents of a sales and purchase agreement that all the parties in a sales process need to consider. Hence, to learn more about the SPA, read on through to the end of the article. What Is A Sales And Purchase Agreement For Business? According to Investopedia, “A sales and purchase agreement (SPA) is a binding legal contract between two parties that obligates a transaction to occur between a buyer and seller. SPAs are typically used for real estate transactions, but they are found in other areas of business. The agreement finalizes the terms and conditions of the sale, and it is the culmination of negotiations between the buyer and the seller.” In the case of the trading of a product or a service between two parties, there is a need for a legally binding contract that outlines the details of the agreement. This is called the sales and purchase agreement, and both parties (the buyer and the seller) need to sign the agreement contract. Furthermore, neither of the parties will be able to disobey the contract at any cost. Otherwise, it might lead to legal action. However, it is not an obligation for either of the parties to stay on the deal in question if one of them disagrees with the deal. Once both parties sign the agreement, they will need to follow the terms of the translation. Some of the essential things that are present in this agreement include - terms and conditions, purchase price, deposits made, limitations, closing date, contingencies, etc. How Does A Sales And Purchase Agreement (SPA) Work? According to Wall Street Mojo, “The sales and purchase agreement of business signifies the culmination of negotiations between the buyer and seller and restricts them from ditching each other. The two parties mutually agree upon it before signing it and making it legally binding. It does, however, require both parties to read the contract carefully and seek legal counsel before deciding whether or not to sign it or request a revision.” The sales and purchase agreement occurs mostly in real estate deals, stock purchases, mergers & acquisitions, advertising contracts, etc. On the other hand, the constituents of the SPA include its purchase price, settlement date, deposits paid during the negotiation process, limitations, contingencies, and many more. Apart from that, in such an agreement, both parties in the sales process need to agree to the contract after thoroughly reading it. For this, a business needs to obtain legal advice after signing it and requesting a change. The agreement, basically, provides protection to the interests of both parties. Apart from that, it also restricts them from working against each other or moving away after signing the deal. This factor helps in minimizing potential conflicts and helps to forecast demand and costs of business. What Are The Constituents Of An SPA? According to the Corporate Finance Institute, “Essentially, the sale and purchase agreement spells out all the details of the transaction so that both parties share the same understanding. Among the terms typically included in the agreement are the purchase price, the closing date, the amount of earnest money that the buyer must submit as a deposit, and the list of items that are and are not included in the sale.” 1. Asset Identification Here, you will get information about the specific asset that is subject to sale. In the case of a real property, the location and other details of the asset are jotted down. 2. Purchase Price and Conditions It consists of the exchange price of the transaction in question. Apart from that, the agreement also contains details about how much is already paid and how much is left. It also contains information about the way that the deposit is to be made. It also outlines how the buyer will pay the remaining balance of the transaction. 3. Due Diligence There is a section in the agreement that asks the buyer to acknowledge their due diligence in the transaction. It also contains the due diligence period, which might contain additional payments. 4. Covenants/Conditions Prior to Close The agreement also contains the next steps of the transaction process. The conditions here must be in order to make the sales process legally binding. If the parties fail to follow or if there is any inaction, then it amounts to a breach of contract. 5. Damages/Remedies In some cases, the parties need an explanation regarding what to do in case of damage prior to the sale or during the transit of a product. Hence, this section consists of various levels of damages that can occur to the asset. As per each damage, there is a remedy present. Final Thoughts Hope this article was helpful for you in getting to know about the sales and purchase agreement (SPA). A sales and purchase agreement for a business is a legally binding contract that consists of the conditions set by the buyer and seller, which both agree upon. SPAs are mostly common in real estate dealings, in which the item of transaction is large and includes a big amount. The SPA basically consists of various important information about the sales deal that includes the prices of the asset, the sales price, as well as the payment terms of the sales. It also consists of information about the due diligence period and the agreed-upon conditions. Do you have any more info to add? Share your ideas with us in the comments section below. Go For The Best And Latest Business Related Articles By Clicking Below!! What Are Articles Of Incorporation? – Importance, Working, And More Inventory Turnover Ratio: Definition, Formula, Working, And More What Are Articles Of Organization? – Let’s Find Out

What Is Risk Management? – Find Out How To Manage Risks in Business

What Is Risk Management?

Why Is Risk Management Important?