Financial risk is often an inherent aspect of running a business, but you can counteract it with good risk management. To protect your organization and profitability, you need to identify the potential threats to your company and find the appropriate solution.
To effectively protect your organization from loss, find out more about the biggest financial threats to your business.
Many businesses are guilty of overspending when starting out. While you might be filled with passion for getting your business up and running, you must avoid spending too much money too quickly or you could destroy your bottom-line.
For example, rather than investing thousands of dollars into your marketing campaigns, aim to generate free press attention and embark on free or affordable marketing tactics, such as:
- Organic social media campaigns
- Guest blogging
- Cross collaboration with likeminded companies
You also should consider initially outsourcing over hiring full or part-time members of staff to lower your overheads while completing tasks on your to-do list.
Inadequate Cybersecurity and Prevention
Unfortunately, hackers don’t discriminate when it comes to cybercrime. In fact, they are willing to go to great lengths to gain access to your corporate accounts and sensitive data. While an antivirus program might have been enough to protect your files many years ago, times have changed and new threats and cybersecurity solutions have emerged.
It is a smart idea to improve your understanding of various cyber threats to your venture. For example, one of the biggest online risks to your business could be phishing scams, which can replicate a reputable company’s site to gain access to a person’s account information.
It is also smart to be aware that a hacker could potentially impersonate your site using a fake Domain Name System (DNS), which is known as pharming and could result in your business losing important customers. Find out more about pharming detection and prevention by visiting: https://fraudwatchinternational.com/malware/malware-detection/
While extending credit to your customers might seem like a smart, long-term investment, it could make or break your company’s success. Every business will take a financial risk when providing customers with financing for a purchase, as there is always the chance they could default on their repayments.
Thankfully, there are various ways to decrease the potential risk, as you could:
- Ensure your business always has a sufficient cashflow
- Charge a high interest rate
- Provide an early repayment discount
- Add late fees for missed repayments
A Poor Market Reaction
To secure your company’s longevity and profitability, you must become adaptable to various marketplace changes or you’ll fall behind your competitors.
A prime example of market risk is the rise of online shopping. Many companies who failed to adapt to the retail industry shift unfortunately fell by the wayside, while those quick to adapt to ecommerce often enjoyed significant revenue growth and a larger customer base.
It is imperative to thoroughly understand the changing conditions in your industry and the marketplace, so you can develop a flexible, forward-thinking business and a healthy annual revenue.