Business Risks Articles

Business Risks of Enterprise Development

Enterprise Development

The growth of any enterprise is always planned considering revenue-generating measures. There is a variety of ways to develop an enterprise. Each industry offers its unique methods. In general, the development of the enterprise happens due to the following measures:

  • optimization of material, goods and inventory management;
  • establishing more favorable contacts with suppliers;
  • creation of additional sales channels;
  • personnel training;
  • automation of manufacturing and producing goods at lower prices;
  • improving the quality of products and services;
  • increasing production and sales.

Types of Business Risks of Enterprise Development

Certain business risks accompany each of the above-mentioned measures. For example, when it comes to optimizing material management, it’s necessary to reduce the number of stocks with a long selling period. These measures also often relate to the risks of improper evaluation of the situation and the choice of the wrong strategy that can leave the company without the necessary goods or stocks.

Trying to establish more advantageous contacts with suppliers, the company can lose the existing supplier at all or receive goods or services of a poorer quality.

Creating additional channels of sales, it’s necessary for the company to make sure whether it can support the increased demand. In case of failure, the business reputation of the company may deteriorate and existing dedicated customers may prefer the products of competitors.

Improvement of the personnel skills always entails the risk of its dismissal. The employees can start their own business or just look for bigger salaries.

Automation can lead to a decrease in the product quality. At the same time, quality improvement may increase the price, which will reduce sales. Increasing production volumes is also a quite risky measure. There is no guarantee that the companies will sell all the products.

How to Reduce Business Risks of Enterprise Development

Any business should develop. It’s very good if the development happens at the expense of the own funds. The risks increase if a company attracts a loan or looks for an investor to implement its development program.

In order to reduce the risks of enterprise development, it is necessary to identify them first. The search for potential risks cannot be done within a company that has not yet worked in a new market environment. Experts or professional risk managers work on assessing potential risks.

The main task of the risk managers is to inform the owners about possible situations that arise in practice and prepare the company respond quickly in case the negative events occur. There are many well-grounded and tested methods for reducing risks. However, implementing each of them requires additional costs. Reducing risk frequently reduces the future profitability. That is why it is necessary to choose the optimal balance between the risk insurance and future profits.

Read also