7 Major Business Risks Every Business Enterprise Should be Aware of

The first and foremost risk for a business is associated with its strategies. It is the risk of a company’s strategy being less effective and failing to reach the expected goals. This risk can be due to technological innovation, any new competitor, a shift in customer demand and others. For instance, Kodak, a dominant company in the film photography market made headlines with its digital camera in 1975 but its discrepancy in strategising next steps and not thinking that other companies might start making digital cameras eventually led to its bankruptcy. On the other hand, unlike Kodak, Xerox Company adapted the laser printing technology and became a multi-billion-dollar business.

Any business needs to follow specific rules and regulations. Failing to adhere to these will land up a company in grave danger. For instance, a company selling products in the US when plans to expand in India, it incurs a significant compliance risk. Every country has its sets of safety, labelling and other rules. If the company plans to open a subsidiary to handle it then it needs to comply with local accounting and tax rules. This might add some significant cost to the business. Even if the company doesn’t expand geographically, the compliance risk is still valid with the expansion of the product line. If a company adds a new product then a whole new set of regulations would be applicable. Also, if any company is not expanding then application of new rules by state or market might beef up the compliance risk. Anything involved to cost draws a compliance risk to the business.

It is the risk involving the unexpected failure of a company’s day-to-day operations. Be it a technical failure like server outrage or an employee’s mistake of writing a wrong amount, operational risk can arise from any people discrepancy, process failure or natural disaster hampering the daily outcomes.

Every risk has a financial impact on the company. However, here, financial risk refers to the sudden hindrance in in-flow and out-flow of money. Weak financial planning and projection create financial risk, while non-payment from clients also creates the same risk. Financial risk is higher for the companies operating in international markets due to the fluctuating exchange rates. Having a lot of debt also increase the financial risk of a company as interest rates also keep on changing with due course.

This is one of the major threats for a business. Be it a small company or a large one, reputation building and maintaining is very crucial for all. If anything happens to a company’s reputation, it directly affects the revenue. Apart from the customers, the employees also might get demoralized and decide to leave the company. Reputational risk can even make a company face a major lawsuit, experience negative publicity and others. It acts as a slow death and possesses the power to shut the company permanently.

No doubt the technology advancements are helping businesses in thousands of areas, but they also they also have adverse impacts on the businesses. Today, organizations are facing many technology risks; cyber-attacks being the most dangerous among all. Due to technological innovations, malware, software failures and others, a company often faces loss or corruption of data and data breach.

The political scenario of a place can also impact the company’s growth creating a risk. A political riot or a policy change can impede business growth.