1 Strategic threat
Everyone knows that a successful business needs a comprehensive action plan, well thought out. But it is also a fact of life that things change, and plans the best position can come sometimes seem very old, very quickly.
This is a strategic threat. It is the risk that your company's strategy to be less effective and the company is struggling to achieve its goals as a result. It may be the result of technological changes, strong new competitor to enter the market and changes in customer demand, and spikes in the cost of raw materials, or any number of other large-scale changes.
History is full of examples of companies facing a strategic risk. Some managed to adapt successfully, while others did not.
A classic example is Kodak, which was a dominant position in the market during the filming of his engineers invented a special digital camera in 1975, saw innovation as a threat to their business model, and could not develop it.
Unsuitability to targeted bankrupt Kodak strategic risks. Now he emerged from bankruptcy as a much smaller in imaging solutions for businesses approach, but if it had changed before, it was able to maintain its dominance.
Faced with a strategic risk does not have to be catastrophic, however. I think Xerox, which has become synonymous with the product documents and a great success, and Xerox chamber. The evolution of laser printing strategic threat to the state of Xerox, but unlike the Kodak was able to adapt to new technologies and change their business model. He became online business laser printing of billions of dollars for Xerox Corporation, and escaped a company's strategic risk.
2. Hazard Risk
Are you comply with all necessary laws and regulations that apply to your business?
Of course (I hope!). However, the laws are changing all the time, and there is always the risk that you face additional regulations in the future. With their own business expands, you may find you need to comply with the new rules that apply to you before.
For example, say you run your organic farm in the state of California, and selling products in grocery stores in the United States, things are going well you have to decide to expand in Europe and start selling there.
That's fine, but also run the risk of a conditionality. European countries have their own food safety standards, describing the system, and more. If a European subsidiary is prepared to face all that, you will have to comply with accounting standards and local taxes. Comply with all these additional regulatory requirements could become a significant cost to your business.
Even if not geographically expand your business, you can still run the risk only new compliance by expanding its product line. Say your ranch wine production in California also starts food. The sale of alcohol that opens a whole range of new regulations may be expensive.
Finally, even if your business has not changed, you could get hit with the new rules at any time. Perhaps a new basis for data protection is required to improve the security of your website, for example. O safety regulations means that staff need to invest in new equipment and safer in their factory. Or maybe you've been inadvertently break al-Qaida, and have to pay a fine. All of these things involve costs, and pose a hazard to fulfill their business.
In extreme cases, compliance risks also affect the future of their work, and became a very strategic risk. I think that tobacco companies faced new restrictions on advertising, for example, or in the 1990s online music sharing service that has been sued for copyright infringement and could not stay in business. We break these risks in different categories, but often overlap.
3. Operational Risk
So far, we have been considering the risks posed by external events. But the company is also a source of risk.
Operational risk refers to unexpected failure on the day of its network operations by day. It may be a technical fault, such as service disruption, or it can be caused by individuals or operations.
In some cases, operational risk has more than one reason. For example, consider the risk that one of its employees to write the wrong amount of choice, and payment of $ 100,000 instead of $ 10,000 in your account.
This is the "people" of failure, but also the "process" of failure. This could have been avoided by the presence of more secure payment process, for example, the existence of the second staff member to authorize each pulse, or use an electronic system that would flag unusual amounts for review.
In some cases, operational risks are also due to events beyond their control, such as natural disasters or power outages, or a problem with your website host. Anything to stop the basic operations with the company falls into the category of operational risks.
While the events themselves may seem very small compared to the major strategic risks we talked about earlier, operational risks that still have a significant impact on the company. Not only the cost of fixing the problem, but it can also prevent operational problems delivery of client requests or make it impossible to contact you, resulting in lost revenue and damage to its reputation.
4. Financial Risk
Most of the risk categories have an economic impact in terms of additional costs and revenue losses. But the kind of financial risks refers specifically to the flow of funds in and out of your business, and the possibility of sudden financial loss.
For example, say that a large percentage of its revenue comes from a broad customer base, and the period of 60 days of credit for that customer spreads (For more information on lending and deal with cash flow, see our cash flow time previous instruction).
In this case, you have a significant financial risk. If the customer can not pay or delay payment for any reason, then your business is in big trouble.
And that has a lot of debt also increased financial risk, especially if a lot of it is short-term debt and because of this in the near future. What if interest rates suddenly go out, and instead of paying 8% on the loan, which is now paying 15%? This is a great supplement to your business, and thus calculated as financial risks.
And increased financial risks when doing business internationally. Returning to the example of California's farm sell their products in Europe. When making sales in France or Germany, revenues are in euros, sales in the UK come in pounds. Exchange rates and volatility always, this means that the amount the company receives the dollar will not change. The company has achieved more sales in the next month, for example, but receive less money in dollars. This is a great financial risk to consider.
5. reputational risk
There are many different types of businesses, but they all have one thing in common: no matter what industry you are in, your reputation is everything.
In the case of damage to your reputation, you will see immediate loss of revenue, as customers become wary of dealing with you. But there are other effects as well. Your employees can obtain moral and even decide to leave. You may find it difficult to recruit good replacements, as I had heard about possible candidates for a bad reputation does not want to join your network. Providers can begin offering less favorable conditions. Advertisers, sponsors or other partners may decide they want to be no longer associated with you.