Risk factors are possible events that, should they happen, could cause a company’s revenues or profits to be lower than what the owner had forecast.They are a standard part of a thorough business plan, whether the plan is designed for internal use by the management team or will be presented to outside investors.It’s hard to predict these events and the damage they can cause.
Risk factors are possible events that, should they happen, could cause a company’s revenues or profits to be lower than what the owner had forecast.They are a standard part of a thorough business plan, whether the plan is designed for internal use by the management team or will be presented to outside investors.It’s hard to predict these events and the damage they can cause.Tags: Business Plan One PageEssentials Of Research And Thesis WritingChemistry Assignment HelpEssays On Social ClassNational High School Essay SNet Cafe Business Plan
If the investor believes the risks could severely hurt the company should they occur, he may decline to make the investment.
As a practical matter, sophisticated investors do their own risk analysis prior to putting money in a company, but the fact the management team is aware of, and has strategies for dealing with, the risks can make the investors more confident about the management team’s abilities.
Analyzing risk factors allows the management team to be confident it is ready for whatever business environment the company may face in the upcoming year and beyond.
The team has strategies in place that can be quickly implemented to minimize the damage caused by threats from competitors or changes in the overall economy.
In final analysis, however, being a successful entrepreneur is about managing risk.
This section, therefore, is about you stepping back from all the preceding analysis (market, competitor, financial etc) and asking yourself where the key risks (and opportunities! The activity of managing risk in your business is an existential, permanent one but the function of penning (and updating) your plan is an ideal opportunity to review the landscape.Monitoring competitors on an ongoing basis is one aspect of this system.The decisions a company’s competitors make pose threats, because they are designed to give the competitors a stronger market position by taking potential business away from the company.Opportunity-based risks for a business include moving a business to a different location, buying a new property, or selling a new product or service.This type of risk comes from uncertainty around unknown or unexpected events.Risk factors are not just considered at the time the company is preparing its annual business plan -- they are year-round considerations, because new threats emerge throughout the year.A venture capital firm or angel investor that is contemplating putting money into a business enterprise must assess the risk that the company’s financial results will be lower than forecast.The business owner will make changes to her marketing strategies, operations and financial management in response to these risks becoming a reality.A company should have a system in place to gather information about emerging or potential risks.You also look for opportunities that can have a positive impact.It allows you to identify the different types of risk and when events in your business will allow you to dictate the opportunities from the uncertainties.