RMI - Risky Business [LESSON]

Risky Business

In this lesson, we will identify possible business threats and employ risk management strategies and techniques to minimize potential financial loss.

Risk Management | Knowledge Point

Did you know that risk management is a bit like predicting the weather?

Risk management is the process of identifying, assessing, and mitigating threats or uncertainties that can affect an organization, project, or individual. Imagine it like a compass that you would use while exploring uncharted territory. It helps you make informed decisions by understanding and handling potential risks.

Risk management is important because:

    1. Just like wearing a seatbelt in a car, risk management helps to keep people, property, equipment, businesses, etc. safe. It helps to protect these things from harm.
    2. Imagine planning a picnic without checking the weather forecast. Risk management helps us anticipate unexpected events (like rain during our picnic!) and prepares us to handle them effectively.
    3. When you know the potential risks, you can make smarter choices. It is kind of like playing chess—sometimes the best move isn’t to avoid all risks, but to manage those risks wisely.
    4. Organizations that embrace risk management are more likely to gain stakeholder (customers, suppliers, other businesses, employees, etc.) confidence. Think of it like building trust with your teammates during a group project at school.

Types of Risks

Just starting a business is a risk! Take a minute to consider all the things that could go wrong or all the things that could potentially happen when opening and running a business. Explore the learning object below to discover some of the types of risks that impact businesses. As you read the descriptions, consider how each risk could be handled.

Types of Risks | Activity

Click on each type of risk to learn more.

Risk Management Steps

Now that you understand some of the potential risks that might impact businesses, let’s explore the steps that can be taken to help manage these risks.

Strategies to Minimize Financial Loss

Strategies to Minimize Financial Loss

There is no way to predict all the types of risks that might impact a business. There are, however, a few general strategies that can be utilized to help minimize financial loss. These strategies are good for almost any type of business and almost any type of risk.

📝 Get Insurance (click to reveal)

This is like having a safety net for your business. If something goes wrong, insurance helps cover the costs.

        • Consider this: Sure you have to pay for insurance, but this helps to transfer some financial risk to a third party in the case of an unexpected situation such as a fire or theft.

 

🚨 Have an Emergency Fund (click to reveal)

Just like saving for a rainy day, businesses need an emergency fund. This money can be used for unexpected (and usually unwanted) surprises.

        • Remember: when it rains, it pours! It is a good idea to have funds to cover for about 3 – 6 months.

 

💰 Diversity of Revenue Streams (click to reveal)

Think of this like having different snacks at a party.

        • If one dish isn’t popular, others can still satisfy hungry guests. Consider alternative methods to make money.
        • Tip: When exploring new ways to make money, consider additional services, creative adjustments, or even strategies not directly related to your product or service (for example, renting an unused portion of office space).

 

📈 Risk Assessment (click to reveal)

This involves predicting and assessing potential risks. Consider what could go wrong and then rate these risks on a scale.

        • Be prepared: Develop strategies to handle each risk. For example, installing smoke detectors and engaging in fire drills helps to prepare for a situation in which there is a fire in the building.

 

Risk Management Strategies | Activity

Participate in the activity below to learn more about how risk management strategies and techniques can be used to deal with possible business threats.Reflection 

Risk is unavoidable. Therefore, it is important to understand how to employ risk management strategies to help protect yourself and your business. Understanding the various types of risks as well as strategies to deal with risk can help guard against unwanted financial surprises!

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