| Risk is a given in any business and it can be damaging | | | | 6. Financial management should continually be done. |
| to a business and even threatens its survival. It is | | | | Ratio analysis will show where problem areas exist |
| therefore essential to be aware of the various risks, | | | | (e.g. in profitability). It also gives an indication of |
| to understand its potential impact on a business and | | | | liquidity and solvency risks. |
| to know how to manage it effectively. This article | | | | 7. It is advisable to hedge a business as far as |
| gives some tips on how to minimise risk: | | | | possible against factors that are not under the |
| | | | control of the business. This is especially true with |
| 1. The product and service offering of a business | | | | international trading and unexpected currency |
| needs to change with the preferences of customers. | | | | fluctuations. |
| Too much reliance on a single product (or a few | | | | 8. Business growth should be kept to sustainable |
| products) should also be avoided. | | | | levels. Too much growth can seriously drain financial |
| 2. It is advisable to have alternative supply chains | | | | resources and can even cause bankruptcy. Systems |
| (including suppliers and distribution channels). Good | | | | and skills also need to keep pace with growth. |
| relationships must be built with all the relevant parties. | | | | 9. Proper standards in manufacturing should be |
| 3. Debt assists companies to grow. It can, however, | | | | adhered to. Products that are not on standard can |
| be dangerous to have too much debt and it should | | | | damage the image of a company or even destroy it |
| be limited to serviceable levels. | | | | in total. |
| 4. Reliance on one or a small number of customers | | | | 10. People are the core of any business and they |
| can be very risky and wherever possible it should be | | | | should be treated as such. People do, however, leave |
| avoided. | | | | a business for various reasons. Where applicable |
| 5. Proper financial planning must be done. Cash flow | | | | sensitive information needs to be protected by |
| planning is one area that can highlight potential risks | | | | confidentiality agreements and restraint of trade |
| and pro-active action can then be taken. | | | | agreements. |