Risk Management! A key to success for startups

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Risk Management! A key to success for startups
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• Sense and manage problems in their smallest
  state, before they become bigger and turned out
  to be lethal.
• Reduce revenue leakage which supports increase in
  revenue
• Improve stakeholder confidence and trust
• Increase the probability of achieving goals
• Your business operates in highly uncertain
  environments. This uncertainty brings a high
  level of risk to your company.
• Risk management is the identification,
  evaluation and mitigation of potential risks that
  can have adverse effects on a business. Early
  recognition and mitigation of risk is a critical
  factor for success in startups businesses, as the
  cushion for absorbing failure is relatively low.
• As per the survey, just 44 of small businesses
  stick around for four years or more. One main
  reason so many go away is Poor risk management.

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• While it is essential to concentrate on the
  positive aspects of your business, but it is
  foolish to overlook potential future risks that
  might damage your company in the blink of an eye.
• The Uncertainty factor
• The risks can emerge from uncertainty about
  different parts of the business, such as
• 1-There is no guarantee that customers will like
  your products or services enough to purchase
  them.
• 2-Entrepreneurs frequently borrow money to
  finance their venture in its earliest stages
  there is a chance that they will not make
  sufficient profits to be able to pay these loans
  back.
• 3-As a business grows, the founders will have to
  delegate responsibility for certain tasks to
  employees whom they do not know well. The
  employees bring uncertainty and risk related to
  their skills and performance.
• 4-Entrepreneurs do not know the correct price for
  their product at the beginning they may have to
  raise prices or change their business model,
  running the risk of alienating customers.

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• 5-Whenever a business ventures into a new market
  or launches a new product line, there are risk
  involved with the logistics and geography.
• So it is necessary to secure your company against
  such risks in order to ensure future success.
• Assessing and Managing Risks
• 1-Financial Risk
• Running out of cash is often the end point in the
  life of any business. Knowing where your cash is
  coming is important.
• You also need to ask yourself some important
  questions like what you would do if
• 1-The cost of your raw materials or suppliers
  could rise suddenly.
• 2- Your biggest client went away or your most
  popular product stopped selling overnight
• 3-A slowing economy could reduce the demand for
  your firms product or service
• While you can't anticipate all future risks, it
  is best to be prepared against the ones you can
  predict. One way to minimize your financial risk
  and give yourself a long runway is to take
  funding when it is available and keeping it in
  reserve.

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• 2-Market Risks
• Market risks refer to finding answers of
  questions such as, Is there a market for the
  product? How do you get customers? What about the
  competition?
• Simplest way for entrepreneurs to mitigate market
  risk is to avoid perfection. When your product
  becomes good enough to make some customers
  reasonably happy, get it into the market where it
  can start generating cash flow and feedback.
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•  3-Technology Operational Risks
• Technology and operational risks broadly cover
  everything having to do with execution, Can your
  team finalize the product design on a limited RD
  budget? Will your product work as intended? Can
  you find reliable vendors? Can you manufacture
  it? Can you optimize the logistics of product
  distribution? do you have a backup plan?
• When it comes to execution, theres no substitute
  for experience. Its all about careful planning
  and watchful management by people who know what
  theyre doing.
• 4-People Risks
• As your business grows and you delegate
  responsibility to employees, part of the success
  of your venture will rest in their hands. The
  right combination of experience, contacts, and
  temperament among the founding team can vastly
  increase a ventures odds of success.
• If you discover that a member of your team isnt
  going to work out, you need to fix it quickly
  before the situation gets worse.

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• 5-Legal Regulatory Risks
• No startup can succeed without legal advice. The
  list of possible problems with legal or
  regulatory roots is almost endless, hiring an
  accountant who will take care of your financial
  liabilities and protect your assets will prove to
  be a boon in the future. Similarly, getting an
  attorney to review your contracts and give you
  legal advice on day-to-day affairs is just as
  important.
• Summary
• When youre starting a company you already know
  youll have a fixed amount of investment up
  front, so you know what the total cost of failure
  would be. For entrepreneurs, anticipating risks
  and preparing for them can make the difference
  between failure and success. The key is to
  quantify risks and come up with some contingency
  measures
• Having a proper risk management strategy prepare
  the business as much as possible for all factors,
  known and unknown, that can hinder its success in
  any way.

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