Facing risk is an inevitability of business life. All endeavour is subject to threats which can knock you or your company off-course. The trick is to recognise these threats and what they mean to your business, then work out what to do about them. The same threat may need a different response from your company than from your competitor, and a different response from you as the risk evolves over time.
Let's explore some different types of business risk:
The threat of not knowing if you have made the correct decision on new products or new markets involving the balance of risk and reward.
The threat of not properly executing on the strategy which leads to poor sales, unhappy customers and poor profits. The threat to the smooth running of daily operations, including staff performance, systems failure or external events
The threat that staff skills, attitude and application can impact performance both during office hours and beyond. Human error happens.
Customer care risk
The threat that customers will have reason to be unhappy with the product or the service received. The threat that your products and services are no longer relevant to the market you were in. The threat that the experienced value does not match a customer's perceived value
The threat that technology-reliant business operations fails due to a myriad of application, infrastructure or device challenges. Business in an increasingly digital world introduces new threats as well as new rewards. Digitisation of data and digitalisation of procedures allows a depth of engagement with customers which is unprecedented, and amplifies the inherent technology risks.
The threat of cyber attacks and the reputational damage that a ransom demand or a data breach can cause are a genuine and growing concern. The threat that supranational bodies levy fines if the processes to protect citizens are not sufficient, without the need tfor an event to have happened.
The threat of non-compliance to a wide body of regulation, legislation and explicit responsibility results in penalty fines, legal action or closure. Compliance is a good way of telling your customers that you have their best interests at heart.
The threat that the company does not fulfil its statutory governance duties. The threat that contracts for service contain obligations which cannot be fully met and/or have inappropriate indemnities. The threat that intellectual property which underpins competitive advantage is not protected.
The threat that volatile markets and economic uncertainty afeect company performance, along with investors' view on corporate social responsibility. The threat of poor financial planning and the need for cash to meet commitments. The threat of credit risk and/or late or non-payment by customers.
Financial crime risk
The threat that your organisation's lack of controls leads to it being used to money laundering. The threat of fraudulent trading or other nefarious use of the company's money.
The threat that the physical assets of the company become unavailable for use, resulting in sub-optimal working practices, time lost, repair costs and legal action.
Reputational damage usually arises because of poorly managed business risks, either from making a misjudged decision on what action to take to mitigate or from failing to recognise the threat, its magnitude or its proximity.