How do you manage risks as an entrepreneur? | Photo Credit: Pexels
Risks are inevitable when running a business, no matter how careful you may appear. At one point or the other, startups are going to take risks that may either hurt the business or help it get better. Entrepreneurs are not expected to avoid risks; they learn to manage them.
Managing risks is threefold, and that includes:
- The things you put in place before taking a risk,
- The things you do while taking a risk; and
- The manner you handle what follows after taking a risk.
So, let’s get at it. What are the best ways entrepreneurs manage risks?
1. They Are Versatile in Their Thinking
Managing risks at any level is more of a thought process than it is of the physical activities that we see. To effectively manage risks, entrepreneurs have to be versatile in their thinking. When making plans about a particular strategy or process, it is essential to consider every side.
Thinking in one direction makes entrepreneurs more vulnerable to risks than they would if they think in multiple directions.
For example, you want to develop a marketing strategy for your startup, and you want to do it uniquely. The mere fact that you want to do it differently takes a risk. However, to manage the outcome of such risk, it is best that you consider if it goes well and if things go wrong. Ask yourself the crucial question: “what happens if this marketing strategy doesn’t go as planned?”
Having this kind of thought will propel you to come up with plans B, C, and D as alternatives to plan A.
2. They Accept and Embrace The Possibility of Uncertainties
Brainstorming session on risk management. Photo Credit; Unsplash
The business world is quite uncertain in different ways. Instead of denying the possibility of uncertainties and expecting that things will always go as planned for you, why not embrace the possibility of uncertainties?
As an entrepreneur, you must note that accepting and embracing the possibility of uncertainties doesn’t always mean you don’t believe in an idea or strategy that is in play. Instead, it means you are positioning yourself to manage risks when they appear in the process effectively.
3. They Weigh Their Losses Against Their Gains
Another way entrepreneurs effectively manage risks is that they weigh their losses against their gains. When investing in a product, service, or strategy, you may not be confident it will yield a particular result to the degree you want it. At this point, instead of avoiding the risk in its totality, you can weigh the risk on a pendulum.
For example, if you invest in search engine optimization, what are the chances of success against failure? If you discover that you have a higher chance of succeeding at it than you do failing at it, then it is a risk worth taking.
Also, entrepreneurs, when weighing their losses against their gains regarding risks, always invest what they don’t mind losing. You must have heard that phrase: “never invest what you’re not willing to lose.” Where what you stand to gain from a particular risk is more than what you stand to lose, then it is a risk worth taking.
4. They See Opportunities Where Others Don’t Expect or Look
When trying to manage risks, entrepreneurs see opportunities that others don’t see or aren’t even looking into at all. In business, there are two essential strategies – the red ocean strategy and the blue ocean strategy.
The red ocean strategy explains the contested marketplace filled with several opportunities. However, many people, like you, are harnessing all of these opportunities. Then, there is the blue ocean strategy, where you have to look into the uncontested space that equally has opportunities. The challenge with considering the blue ocean strategy is that you must be a risk-taker.
The beauty, however, of seeing opportunities where others don’t is that the rewards are always worth the risk in the long term. Risk-takers aren’t always excited to provide solutions, but they always ensure the solutions they are providing are targeted to specific problems.
5. They are not Emotional About Financial Decisions
One of the pitfalls of entrepreneurs is being emotional about financial decisions. Entrepreneurs who make emotional, financial decisions tend to be lacking in the area of risk management. Every risk to be taken by a startup will have a corresponding financial implication. To be emotional about financial decisions is not to be willing to provide the financial backing needed to take risks.
Entrepreneurs who understand the importance of risks know that to get value, you must give value. To get more money, you must be willing to spend money. To effectively manage risk as an entrepreneur, you must be logical about the financial decisions you make for your startup. When investing and taking risks, think of the long-term effect of such investment and risk on the business.
6. Transfer the Risk to Insurance Agencies
Entrepreneurs also manage risk by transferring such risk to insurance agencies. Instead of exposing your startup to the high cost of managing the negative outcome of taking risks, why not get a comprehensive insurance policy for your business. You can choose from several insurance policies that can come in and salvage the situation when there is an unprecedented outcome.
To decide on the best insurance policies for your startup, you may need to speak to a professional underwriter to advise you.
Conclusion
Every entrepreneur is a risk-taker and also sees to managing the outcome of risk taken. The type of risk you will take as an entrepreneur depends on the size of your business, your goals, and how innovative you are. However, to effectively manage risks as an entrepreneur, you will need to accept and embrace the possibility of uncertainties.
You will also need versatile thinking and prediction of multiple possibilities to help you design alternative plans to a major strategy.
Also, it is essential that you do not forget the roles insurance companies play in helping startups manage the outcome of risks. If you don’t have an insurance plan in place for your business, now is the time to get one.
References
Medium; 4 Ways Entrepreneurs Can Manage Risk
Investopedia; Top Ways to Manage Business Risks
Investopedia: Identifying and Managing Business Risks
Entrepreneur; 5 Ways Entrepreneurs Learn to Manage Risk
AbstractOps
Are you an entrepreneur who is worried about what risk is worth taking and which isn’t? Do you want the right guidance or further information regarding the benefit of taking risks? Then, your best shot is to reach out to AbstractOps.
We are always available to provide startups and entrepreneurs any information they need as it relates to taking risks. You can reach out to us at hello@abstractops.com.
