In my last post Steps to determine risk levels of your entrepreneurship I explained how is it possible to determine the risks importance according to the probability and impact. Even though this information is not only important but also necessary, it is not the only thing the entrepreneur has to make regarding risks. He also has to decide how is his newborn business going to manage each risk, taking into account that these events are likely to happen and can affect negatively his business. On the next paragraphs I will present three strategies to manage risks in your entrepreneurship.
The first strategy the entrepreneur might use is to avoid. This is achieved by removing the risk’s root cause. In this way it is not possible that the risk materializes in a future. For example if the risk you want to avoid is “cash theft in registers” you might stop accepting cash payment in your stores and only accept payments with credit card or debit card. Therefore you will be eliminating the possibility because you don’t have cash in the stores. This does not eliminate the possibility of other kinds of thefts such as equipment or furniture theft in the store, but the risk of cash theft is gone.
The second strategy that the entrepreneur has is to transfer the risk. The easiest example of this we can observe it in any kind of insurance. For example if you pay insurance for equipment on your business, in case that someone steals them or they are damaged, your company wont be the one that has to pay for the loses but the insurance company. In this way your entrepreneurship is released from the responsibly and will only have to pay for a deductible that must be paid in any kind of insurance.
The last strategy that you have as entrepreneur is to accept the risk. This means that you recognize the risk and will take on in case it occurs. Generally you decide this in cases where the probability of occurring is low or the impact is low. The acceptance of the risk may be active or passive. It is passive when it is taken on and you don’t do anything to mitigate the effects of the event in the case it occurs. In the other hand active acceptance happens when a contingency plan is created.
In this way you can see that the entrepreneur has more that one option regarding what to do with risks that can threaten his newborn company. The important point is that he decides what to do with each risk, so he and his employees know the actions they must perform so that the occurrence of this events don’t affect the company.
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