Risk Management

1. TOPIC 9:
Risk Management

2. Risk Management for Start-up
 Only 44% of small businesses stick around four years or more. One big reason so
many go away: Poor risk management.
 An art and science of thinking about what could go wrong and what should be done
to mitigate those risks in a cost-effective manner
 Risk management simply helps you understand your business’ risk
likelihood of occurrence
severity of the potential
consequences.

3. Risk Mitigation
 Quadrant A: Ignorable Risks
 Quadrant B: Nuisance Risks
 Quadrant C: Insurable Risks
 Quadrant D: The Company Killers

4. Risk Mitigation – Ignorable Risk
Risk Type • Ignorable Risk
Impact • Minor consequences and financially cost-effective
Example
• Delaying small business deal meeting for more important
business deal meeting.

5. Risk Mitigation – Nuisance Risks
Risk Type • Nuisance Risks
Impact
• Little things that often seem to go wrong, impacts are
easy enough to minimize through straightforward
changes in behavior.
Example
• The printer runs out of toner while you’re preparing the
proposal for the customer meeting that starts in 30
minutes. Solutions: Don’t wait until the last minute, and
always keep extra toner on hand.

6. Risk Mitigation – Insurable Risks
Risk Type • Insurable Risks
Impact
• Insurable risks are risks that insurance companies will
cover..
Example
• When you buy commercial insurance, you pay premiums
to your insurance company. In return, the company
agrees to pay you in the event you suffer a covered loss.

7. Risk Mitigation – The Company Killers
Risk Type • The company killers.
Impact • High likelihood of occurrence and major consequences.
Example
• Cash runs out and total current liabilities (i.e., bills due
now) exceed total liquid assets.

8. Risk example
Risk from lack of diversification
Client Concentration
Small businesses that are financially dependent on one or two large clients run the
risk that these contracts may fall apart or the key clients may run into difficulties of
their own.
To mitigate this risk, entrepreneurs should diversify their income stream and avoid
having a majority of their revenue coming from a very small number of clients.

9. Variety of Risk
 Market Risks
 Product Risks
 Competitive Risks
 Technology & Operational Risks
 Financial Risks
 People Risks
 Legal & Regulatory Risks
 Systemic Risks

10. Product Risk
Decide
what you are
selling
Explain what your
product
Make it top priority
when starting a
business

11. Market Risk
Knowing your
customer and
why, how and
where they buy
related products
Build them
effectively
In timely fashion
and within your
budget

12. Financial Risk
Identify key
business
milestones
Identify when equity or
debt investments are
necessary to reach the
next major milestone.
Builds the
confidence in your
potential investors

13. RISK MANAGEMENT
Identify the
Risk
Analyse
the risk
Evaluate
Risk
Risk
Response
Planning
Monitor
and
Review
the risk
Recognise
the risk
Understanding
of the nature
of the risk and
its potential to
affect project
Whether the
risk is
acceptable
or whether it
is serious
Create risk
mitigation
strategies,
preventive plans
and contingency
plans
Monitor, track
and review
risks.