Take charge of managing business risk
In a world that seems to be constantly changing, growing your business can seem challenging at times. It is important to have a clear view of the potential risks you may face and how you can protect your business without restricting business growth.
Change and uncertainty
The right path today may not necessarily be right tomorrow. Although balancing short-term focus with a long-term approach is difficult, benchmarking and adopting a rigorous analytical approach to processes, markets and products or services may help identify trouble spots before they hit the bottom line. A flexible and proactive approach to market shifts is essential but this can also help sustain longer-term growth.
Growth attracts competition. Reaching new markets and driving more revenue from existing customers is vital. Identifying competitors and customers through regular market analysis also enables informed business decisions to be taken regarding finance, processes and policies.
At its most basic, technology is used for the control of financial records, customer and business interactions and compliance, for example. As a business grows, even these functions become more difficult and eventually unmanageable. Ignoring IT developments could stifle growth. Try to view technology as an enabler. The creation of standardised, automated processes across a business can facilitate a focus on adding value and improve the enterprise-wide view of activities.
Business risks include strategic, compliance, financial, operational, and reputational risk. Risk levels increase during growth, especially when moving into foreign markets. Financial risk in particular covers a broad sweep of activities including managing interest rate fluctuations. Methods to mitigate risk for FX volatility, for example, include hedging using forwards and options. These can allow measured price adjustments over time if costs rise but may also benefit the business in favourable market conditions.
Poor cash and liquidity management can be a serious constraint on growth. The key is to control working capital management so that cash flow is optimised. This means balancing operational, tactical and strategic cash. Managing aspects such as inventory, suppliers, the cash conversion cycle, investment, and debt require coordinated planning across all operations and functions. Diverse solutions such as supply chain finance and cash pooling can keep the cash flowing as a business invests in growth.
Regulation and compliance
The regulatory impact on business includes national and international sector or industry-specific regulations, general regulations (such as environmental controls), and financial regulation. Businesses must understand each regulation that applies, its impact and how to deal with it. Demonstrating clear compliance shows effective management procedures are in place which, in terms of growth, may be an essential criterion for financial providers and investors and, in some cases, new customers.