Assessing Business Risk: 6 Things to Look For

Is your business at risk? You already know the answer to this question. Yes, of course, your business is “at risk” — every enterprise is. A better question might go something like: Do you know the specific risks your business could face as it grows?

That’s a more difficult one to answer. A lot depends on what your business does, where it plans to expand, and how quickly it hopes to scale. Nevertheless, most growing businesses share some risks in common. Let’s take a closer look at six general perils that your enterprise could face in the near future.

1. Cyber Liability Risk

This is a basic cost of doing business in the modern world. You can’t shut yourself off from the public Internet, nor should you. So you have to manage the risks that connectedness brings.

These risks run the gamut from targeted, insider-driven data thefts to ransomware attacks to more sophisticated intrusions of unclear origins — like the incident that affected Asiaciti Trust and other firms in the fall of 2021. 

Regardless of its precise nature, any cyber incident is a potential liability for your enterprise. It could present a threat to your reputation, revenue, financial reserves, and more. While it’s impossible to entirely eliminate your exposure, you’ll need to make significant investments in cyber security as you grow, with the aim of making yourself less vulnerable than your competitors.

2. General Digital Security Issues

Digital security is about more than managing the risk of a headline-making data intrusion or hack. Innumerable smaller intrusions occur every day, affecting companies of all sizes. If and when these events compromise customer data or company secrets, they create a threat that must be addressed.

Again, prevention is the best medicine here. Invest in robust network monitoring, enterprise-grade antivirus software, a well-defined software update cycle, and tight data hygiene practices across your entire enterprise. Don’t wait for a data incident to do what’s needed.

Read: Understanding the Latest Cybersecurity Trends

3. Foreign Exchange Risk

As you expand into other territories, your firm’s cash flow becomes vulnerable to foreign exchange risk — fluctuations in the value of other currencies in relation to your home country. 

Currency fluctuations tend to happen slowly and to be at least somewhat predictable over longer timescales. But events can intervene; countries subject to sanctions regimes may see their currencies’ value decline precipitously. And certain industries are particularly vulnerable to foreign exchange risk; commodities and basic materials tend to be sensitive to the value of the U.S. dollar, for example.

4. Supply Chain Vulnerabilities (Third Party Vendor Risk)

The more complicated your firm’s supply chain, the greater the chances of a disruption or price shock somewhere along it. We’ve already discussed digital supply chain vulnerabilities, but what happens when a COVID outbreak shuts down the Chinese port you ship from for two weeks or your contract manufacturer goes belly-up? 

At best, you’ll need to scramble to make alternate arrangements. At worst, you’ll need to accept a period of zero cash flow that could threaten your firm’s viability moving forward. Clearly, you need to plan around known supply chain weaknesses, and you need to do the best you can to anticipate black swans too.

Read: Future-proof competencies for the post-pandemic economy

5. Vulnerability to Natural Disasters and Climate Disruption

Even if you don’t have extensive physical assets and use a fully dispersed workforce, you’re vulnerable to natural disasters and climate risk. It’s also important to consider having emergency fuel to avoid downtime and keep your systems fully operational before and after disaster strikes. Understanding how to assess climate risk in particular is an entirely separate conversation, but suffice to say that you need to bake the likelihood of weather-related disruptions into your risk model if you haven’t already.

6. Political Risk 

Finally, no matter where your firm does business, it’s vulnerable to political risk. Such risk exists on a broad spectrum, from unfavorable election outcomes to authoritarian slides to punitive government policies that threaten your business in a particular jurisdiction. Indeed, the degree of political risk you’re likely to face in a new market could make or break your decision to enter that market or pass on the opportunity.

Have a Healthier Relationship With Risk

Founders tend not to be a risk-averse bunch. Nor do executives tasked with managing explosive growth, whatever their stake in the enterprise. These folks know that risk is part of the game. 

That’s not to say they minimize or ignore risk. Quite the opposite. Successful founders and startup executives know that they’re playing a dangerous game. But they also know how to manage risk — and when to say “enough is enough.”

Read: Eliminating Cyber Risk With Strong Data Retention Policies

They’re risk-takers, sure, but they’re not reckless. Learn from them. Each of the types of risks we’ve discussed here could threaten your company’s growth at any point during its journey, and you can’t avoid them entirely. What you can do is make a plan to manage your exposure to the risks you know you’ll face. 

In other words, you can have a healthier relationship with risk. It starts today.


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