We make business decisions daily – some big and some small – but often we don’t realize what are business risks and how are we choosing to manage these risks. As we embark on our entrepreneurial journey, it is so crucial to understanding what business risks are and how to manage them.
Risk is the possibility of losing some or all of your original investment and it exists when assets, vulnerability, and threat are intercepted.
There are four ways we deal with risk, though we often use a mixture of these to manage our risk.
*Acceptance of the risk
*Avoidance of the risk
*Mitigation of the risk
*Transference of the risk
Avoidance – we may choose to avoid the risk as the risks may be too high. For instance, we may have back up systems or generators to avoid business interruption.
Acceptance – we simply accept the risk and to deal with the risk when it happens. We may choose to offer online services even though we access that the data breach risk exists.
Mitigate – We implement action to minimize the existing risk that may occur. For example, we may outsource cybersecurity managed services if we don’t have a strong in-house IT team.
Transference – After assessing risks, we may decide to transfer the existing risks to a 3rd party who is willing to take on that risk for us in return for payment or premium.
As we assess our risks – we may utilize a combination of managing our risk. We may decide to assess our financial risk and realize that we need to mitigate our risk by having IT security services and we may also choose to transfer the risk by having cyber insurance coverage. We may accept the risk of driving and transfer our risk by getting car insurance if we get into an accident.
It is very important to mitigate and transfer risk where we have the opportunity, so we don’t face the expenses at the cost of losing our business.