Diversify Your Business Risk through Shared Risk and Reward Programs

Diversify Your Business Risk through Shared Risk and Reward Programs Risk assessment is a principal tool used to make current environmental decisions, but it is still crude, expensive, and controversial.

While diversification is indispensable to managing financial investment risk, business leaders need to prevaricate their bets and manage their financial vulnerabilities.

Risk taking is the part of business strategy that involves assessing how a business’s decisions will damage or benefit the company. Every business encounters risks, which may or may not be anticipated or controlled by the company.

This does not mean you attempt into markets or embrace technologies you don’t understand, but instead that you look at what you are already doing and categorize natural market synergies and product line extensions. In addition, it is best to be ahead of the curve on market trends and changes rather than lagging behind them.

Leaders Comprehend the Value of Shared Risk and Reward Programs

There is no seamless diversification strategy. It is more of an art than a science. The significant thing is to protect your margins and stabilize your cash flow while growing your top line. For example, you may have some parts of the business that are in a fast growth mode and eating cash. In this case, it would be helpful to have other areas of the business that are growing more incrementally, generating surplus cash flow and steady margins.

Risk assessment is a form of analysis of the probability and magnitude of harm from various events and activities. Related to the science of risk assessment, risk management determines how to plan for and communicate about risks. Risk perception is a science devoted to examining the qualitative aspects of risk, not simply its quantitative aspects.

To bring together the various disciplines and implement integrated risk management, ensuring the buy-in of top-level executives is vital. These executives can institute the processes that enable people and resources across the company to participate in identifying and assessing risks, and tracking the actions taken to mitigate or eliminate those risks.

You may also have become too reliant upon one client and need to have a marketing strategy that pushes you to identify multiple new prospects that have the potential to grow with you in the same way. You may entered one market as much as you can and need to expand to other geographies. Never rest on your marketing laurels or get too self-satisfied. Companies needed to take advantage of regional management contracts.

I realize that business size does come into play here. However, regardless of how big you are, do not become a “one trick pony.” Anticipate that your business will have up and down periods and then think of imaginative ways to smooth out this curve. All good leaders understand and embrace the importance of diversification. To the maximum degree possible, put your fate in your own hands instead of being subject to whims of the marketplace.

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