Every organization faces risks or threats that could disrupt the operation of the business. It could be the death of a key employee, fire razing the headquarters, natural disasters, or even a cyber-attack. Business continuity ensures that your organization continues running despite the prevailing circumstances.
Disasters are often unpredictable, and they tend to have widespread damage that halts operations of the organization. Business continuity seeks to anticipate these disruptions and come up with ways to recover. In many ways, business continuity is similar to risk management as they both seek to identify threats that could affect the business. These risks include:
1. Economic risks
These are macroeconomic circumstances such as government regulations, political instability, inflation, increased interest rates, increased taxes or duties, change in market prices, or an increase in the cost of materials. A change in any of these macroeconomic factors could lead to loss of business.
For example, if the government were to increase duties on your raw materials, thus making them more expensive to import, you would either have to increase the prices for your products or agree to the low margins.
The world is currently in a crisis where every country is trying to isolate itself in the hope that it can control the spread of coronavirus. Countries like Japan, Italy, China, and Iran are experiencing the effects of this pandemic. Airlines are reducing flights to affected areas while countries such as the US and the UK have suspended sports. Industrial output is down 13.5% and while retail sales are down 20.5%.
Is the US economy ready for this pandemic? The US will experience a slight slump in GDP growth as it’s expected for the global economy. As a business owner, the best you can do is prepare for the coming months. Your business will take a hit, and you have to think of ways to reduce the losses.
However, you can mitigate some of these problems by keeping up with current news, policy changes, and everything happening in key markets. Also, monitor your investments in these key markets and ensure that you pull out at the slightest sign of danger.
2. Financial risk
Financial risk is broad and covers a lot of scenarios. It could be simply having trouble keeping up with obligations such as debt payments. In general, financial risk encompasses the risk of losing money.
There is also operational risk due to poor management, which makes it harder for companies to sustain financial undertakings such as paying workers.
As a business owner, it’s your duty to understand your business and the risk involved. If you’re growing a business, know how to manage capital. Don’t take up too much capital from investors, if you’re not sure about growth. Proactive risk management can help identify such risks.
You’ll have a better idea of how much debt your business can take without hurting its continued growth. If possible, fund your business without external help from investors and banks as it will help reduce the financial risk. Also, during a pandemic, it’s not the time to pump more funds into your business. This is a period when you need to save your resources, considering that the production rate will reduce as well as sales.
Also, be sure to cushion your business by insuring your business against potential threats.
3. Strategic risk
Every business needs strategies to help achieve the desired goals and objectives. However, there is always a subtle chance that these strategies might not work. These risks can be opportunities or uncertainties.
For example, in 1975, an engineer working for Kodak invented the digital camera and predicted that it would be the future of photography. Kodak was too caught up in its ways and success that the company decided that the idea wasn’t worth pursuing. This was the beginning of the downfall of the mighty company, which filed for bankruptcy in 2012. While Kodak did try to participate in digital technologies, they didn’t quite embrace the opportunities that these disruptions caused.
The key to mitigating strategic risks is by understanding your business, its operating market, strategic objectives, and environment. Carry out an exhaustive analysis of your business and come up with ways to reduce the risks.
The world is experiencing a pandemic, and it will affect businesses, even yours. It’s time to think of ways to reduce the impact of the pandemic on your business. Review your strategies to see if you could make any changes.
4. Technological risks
Technology is essential, and it’s designed to make work easier; however, it also poses a risk to your business. For example, an e-commerce website can crash or be hacked, thus losing revenue for the period it will be down. A manufacturing plant could lose revenue if they were to experience a power outage, especially if they don’t have an alternative power source.
Every time the system that runs or supports the business goes down, the normal operations of the business also come to a halt. If the system isn’t fixed in due time, the business loses revenue. This is why you need a plan in case of such scenarios. You need to have a plan in place in case there is a power outage, server down, system malfunction, or a hack.
If the system is down for weeks or months, you might never recover, especially if you’re a small business. Assess your systems and perform regular maintenance. Schedule maintenance during non-peak hours and have a plan in case there’s an issue.
Running a successful business is hard as there are many challenges and risks involved, as discussed above. The only way to ensure that your business survives when faced with these risks is by having a risk management plan as well as a business continuity plan.