A business is faced with a number of risks both internal and external which if not properly managed can bring the business down. There so many things which can wrong in areas of quality of products or services, employees , customers, working capital , IT , raw materials and power among other things. Are we aware of what can go wrong? If yes, are we doing something about it? This article will look at the key risks which face the business in general. The risks are broken down into internal and external risks as follows;
Internal risks
These are risks which result from factors which are within the organization. These include the following;
Business plan
Quite often many people venture into business without a business plan. They may have a mission but lack a plan to implement it.
Capacity of management
Some businesses are started without adequate capacity to manage it in accordance with the business plan. The management team is not able to put a management structure in place and to overcome the daily challenges which face the business. There is therefore a tendency of fire fighting throughout the life of the business as management is not able to plan for the challenges. The option available with this type of risk is to change the management team. But it is difficult to change the management team in early stages of the company as it often includes the owners of the company.
Lack of adequate resources
Some companies are set up with challenges relating to resources which include the following;
- Lack of raw materials
- Lack of working capital
- Lack of expert advice
- Lack of modern equipment
- Lack of storage facilities
- Lack of competent human capital
Lack of positive mindset
The management and staff must have a positive mindset towards different life situations in order to succeed in business. No business can survive if management and staff have negative mindset.
The external risks
These are risks resulting from the economy, external stakeholders, political environment, technological changes and others factors from outside the company which affect the company. The external risks include the following;
- Technology changes resulting in obsolescence
- Regulatory compliance issues
- Natural disasters
- Health issues like Ebola virus
- Break up of war
- Political and economic issues
Author
John Muhaise Bikalemesa
Director: Big Drum Advisory Services Limited
john.muhaise@bigdrumassociates.com
