How to Mitigate Risks in Your Business to Protect and Enhance Your Profits

By Charles Alvarez , Contributor, the Price of Business Show. * Sponsored

Bernard Baruch, the famous financier, once said, “When business is good for any period of time, eventually people come to believe that business will always be good. When business is poor for any period of time, people eventually come to believe that business will always be poor. Neither is correct. Business fluctuates.”
Begin the process of securing your future by developing accurate and conservative cash projections for the next six to twelve months. How much do you have? How much will you need? Develop high-, medium-, and low-range estimates of sales, revenues, and profitability. Always ask, “What is the worst possible thing that could happen financially in the coming year?” Whatever it might be, provide reserves to guard against any unexpected decline in sales and revenue.

Identify your key sources of sales, and your most important customer groups. What are your best-selling products and services? Who are the most important individuals or organizations that buy from you? What can you do today to secure and protect these sources of business? Never forget that the purpose of a company is to create and keep a customer. You must pay as much attention to keeping customers as you do to acquiring them in the first place.

Think about your key sources of money and your most important banking relationships. What would happen if your lines of credit were cut off for any reason? What could you do to guard against any problems with your bank?

How can you strengthen your banking and financial relationships? How can you improve them? What alternatives do you have if the worst should occur? Hope is not a strategy. Remember that, “An ounce of prevention is better than a pound of cure.”
Your business should be fully insured against every emergency for which you cannot sit down and write a check. Use a good insurance broker to help identify every business activity in which you could be vulnerable to loss, litigation, or lawsuit of any kind. With the tort system as out of control as it is today, you must take every precaution. One of the smartest things you can do is to purchase liability insurance to protect your- self against someone claiming damage or injury from some activity of your business or your staff. Fortunately, liability insurance of this kind is relatively inexpensive.

Identify Your Key People
The value of your business comes from the people who work there. Identify the key people who add the most to your com- pany’s value and then ask yourself,“What would I do if I were to lose one or more of these people?”
Practice scenario planning regularly. Look into the future and identify the most harmful events that could possibly occur regarding not only your key people but every aspect of your
Foresight refers to your ability to think ahead well into the future and accurately anticipate what might happen to help you or hurt you in the months and years ahead. Even if an occurrence has only a small probability of happening, if the negative effects of that event could be severe enough, you should think about how you can guard against it. You should always be mentally prepared for any setback or reversal. This is the hallmark of the excellent leader.

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All opinions expressed on USDR are those of the author and not necessarily those of US Daily Review.

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