To manage and reduce risk, you need to acknowledge that there are threats to your business, and processes need to be in place to deal with them. Ideally, you must identify those risks and take steps to proactively mitigate them before your limited company formation.
Internal Controls to Prevent Risks
Adequate internal controls help you mitigate risks to your business. These are the two categories of controls that exist;
- Preventive Controls are taken before risks ever occur. They help avoid these potential risks and make contingencies for when they cannot be avoided.
- Detective Controls are taken after damages occur from a risk. They help find the problems that caused the trouble and then help mitigate the damages.
Actions That Can Help Minimize Potential Risks
If you want to reduce risks, you need to evaluate your controls and make alterations if necessary. You can take these actions for assistance;
- Have a reserve of cash to use in case you experience unexpected costs or losses.
- Protect your assets. Keep them in a bank, storage room, or just behind lock and key.
- Protect your corporate data. Keep backups, firewalls and competent IT staff to help take care of any system failures.
- Carefully screen employees before hiring them.
- Make sure every employee is trained and trustworthy before having access to a critical system.
- Only allow a restricted number of employees access to critical data.
- Create specific divisions in your company to help deal with specific issues, like HR, Financial Division, etc.
- Create a form of check and balance over sensitive actions and transactions.
- Perform an internal audit or inventory checks to ensure nothing goes amiss.
- Review your overall company performance and think up ways to improve it.
To be financially sound, your business must have adequate internal controls. A risk management plan will help you to make better choices when taking on risks.
You must learn how to detect risks and use the risk management process to help identify them.
Risk Management and Keeping The Business Running
Business continuity plans are a collection of strategies and procedures designed to maintain the ability of an organization to keep operating its business in spite of threats that have been identified. These plans help create contingencies and outline everything you should do to keep your business running despite a risk. It requires deep analyses, which can help in;
- Understanding how your business may cope during downtime.
- Calculating recovery time objectives for the services after damages to the business model.
- Understanding the resources that might be required to keep the critical functions of your business running.
The business impact analysis will serve as a foundation for your disaster recovery and business continuity strategy.
Regularly Reviewing the Risk Mitigation Measures
Risk assessment should be a routine part of your business. This is for the same reason why due diligence is a standard part of investment: it saves you from making bad decisions in haste or from missing out on good opportunities. In addition, it helps increase your profit margin by a significant degree. Lastly, it helps make your brand name credible in the market by giving an aura of professionalism and a can-do attitude.