3 Tips for Calculating Business Risk, Beginners Must Know

In starting or managing a bisnis, requires careful calculations so that the business can run well. Not only income and expenditure, there are various aspects that are also important to take into account, such as business risk.

While it's important to be optimistic, it's good to be prepared. Businesses should mitigate risk to anticipate losses that may occur and be more careful in acting.

Then, how to calculate business risk? Check out the following tips.

Use SWOT Analysis

SWOT analysis is an acronym for Strength (strength), Weaknesses (weakness), Opportunities (opportunity), and Threat (threat). This analysis is a method used to identify the internal and external situation of the business as a whole.

At the point of strength or strength, aspects that need to be identified are the things that are the advantages and plus points of your business. Examples are the use of the latest technology, a positive and well-known business image, or a strong business network.

At the point of weakness or weakness, aspects that need to be identified are things that have not been maximized and become gaps in the business. For example, human resources are not qualified, a business that has not been established for a long time and has not much experience, or business processes that have not been maximized.

At the point of opportunity, you need to identify opportunities from the external environment that can support business success. For example, there are many enthusiasts for business products, products are always needed, and trends that support.

Then in the last point, namely threats, you need to identify external aspects that can threaten the existence or success of the business. Examples are the number of competitors in similar industries, political, economic, and social situations that are not supportive.

By knowing every SWOT element of your business, it will be easier for you to identify risks and potential losses. Not only that, the elements of strength and opportunity make you more observant to see opportunities to find solutions in dealing with risks that occur.

Create a Risk List

Business risk consists of several types, such as financial risk, operational risk, production risk, to marketing risk. To identify all risks clearly and completely, you can make them in tabular form.

First of all, identify possible risks thoroughly, then record them on a list. Second, think about the possibility of these risks to occur. You can give points on a scale of one to five, or one to ten. The more points you give, the greater the tendency for the risk to occur. Third, identify what impact will occur if the risk actually occurs. Then fourth, write down solutions to overcome this, or things that can minimize the impact.

That way, this table not only identifies what risks may occur, but also gives you direction on how to act to address the risks.

Ask Questions

The earlier you identify risks, the better. Therefore, you should be vigilant, careful, and critical in making business decisions. You have to think about the pros and cons of each choice you make, to ensure that the decision you make is the best one.

Well, here are some questions to guide you in considering business decisions:

• What if the market trend changes?
• What if the economy is unstable?
• What if there is a natural disaster in the business area?
• What if market demand decreases?
• What if the expenses are too big?
• What if a new competitor appears?
• What if a competitor puts out a similar product or service, at a discounted price?
• What if there are government regulations that burden business operations?
• What if your office or warehouse experiences a disaster?
• What if human resources are inadequate?
• What if there is a negative image of the business?
• What if the price of raw materials goes up?
• What if the production does not meet the quality standards that have been set?
• What if the product doesn't sell?
• What if the product does not meet customer satisfaction?

Of course, there are many more questions that you can adjust to the situation and conditions being faced by the company.

In essence, a business requires careful planning in order to achieve its goals. Although it is impossible to avoid all risks, at least you are better prepared and know what action to take.

Identifying business risks does not mean being pessimistic, but being realistic. Hopefully some of these tips can help, yes!

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