An Introduction to Online Business Risk Management
Online business risk management is something that you need to familiarize yourself with, as there are many different risks that can affect businesses.
Each of these should be taken into consideration in order to manage its effects and ensure that your blog or online business has the greatest chance of success.
The Concept of “Managing Risk”
It’s easy to define risk. If you drive while you’re texting on your phone, you’re taking a risk. If you go on a date, you’re risking rejection.
Even accepting a job involves a certain level of risk regarding paying your bills and fulfilling professional obligations.
In the business world, risk is specifically defined as any scenario that has a negative effect (especially financially) on your business. These risks are often related to a company’s:
- Overall goals and objectives.
- Compliance with laws and regulations.
- Financial condition.
- Methods of operation and administration.
- Environmental factors.
The Five Major Risks Entrepreneurs Face
While there are many different kinds of risks associated with business, entrepreneurs in particular face a specific set of risks that they must keep in mind as they weather the ups and downs of starting and growing a business.
These five risks, as laid out by the Western Governors University, are as follows:
Founders Risk
This takes into consideration the founders of a company, their skill sets, and their ability to get along with one another.
If the individuals in question are at odds or, even worse, openly hostile or antagonistic, it can be a disadvantage to a company as important decisions are made.
Competition Risk
Competition risk measures how well an enterprise compares to other companies within its niche.
How does the quality of your company compare? What about your reach? Do you have a unique value proposition that helps you stand apart from your competitors?
Market Risk
Similar to competition risk, market risk sizes up your ability to answer a problem that is present in your market or audience.
What do your products or services do and how does that solve a pain point that your customers are facing?
Product Risk
This risk focuses on the product or service that you provide. How will you design, manufacture, and create your products?
Who is involved in the process and are they talented enough to help you succeed? How will you recruit further personnel to help with product development in the future?
Sales Execution Risk
No matter how polished your value proposition, effective your product, or integrated your team is, if you can’t find ways to get your products or services to the people who need them, you’re sunk.
How does your company plan to offer your products to consumers in a way that demonstrates that you are a solution to their problems? In other words, how do you plan on making sales?
These five concerns outline the biggest risks that startups and the entrepreneurs who run them must consider. All of the risks involved must be carefully considered and mitigated wherever possible.
This can be accomplished by starting with forming unified leadership, building an effective team, creating quality products, and then marketing them effectively.
Managing Risk
While it’s good to understand the potential risks involved with owning a blog or e-commerce business, what does it mean to manage those risks?
In general, online business risk management consists of the following steps:
- Begin by identifying the risks that your particular blog or online business face.
- Next, assess the importance of each risk. The possibility of your site being hacked, for instance, is a more immediate concern than making sure that you have the next five years of product development researched and planned out.
- Once you’ve identified and prioritized the risks that you’re facing, begin to take steps to manage them. This typically consists of finding ways to either reduce or avoid the risk entirely. If this isn’t possible, look for ways to transfer the risk to another party, such as an insurance company or contractor. If all else fails, consciously accept the risk as an identified long-term concern.
- Finally, once you’ve taken steps to mitigate or eliminate your risks as much as possible, make sure to regularly follow up on them. Monitor each risk and review each situation on a regular basis in order to make sure that nothing has changed.
Tips for Basic Risk Managing for Online Companies
Of course, knowing what online business risk management is won’t help very much if you don’t have a tangible, real-world way to apply it to your company.
If you own a successful blog or other online business, here are a few ways to address common risks associated with the e-commerce world:
Make Sure to Properly Dispose of Data
It’s hard to believe that something as unassuming as a blog or a simple shopping cart can be a threat to a company’s security, but the risk is very real.
In recent years, it’s become increasingly important to properly protect not just your own digital information and assets, but your customer’s information, too.
If you take orders online, make sure that you use a secure checkout service like PayPal or ProPay, as well as a quality shopping cart to keep your customer information safe and sound as you process orders.
If you have an email list, use a reputable email service provider like MailChimp or Constant Contact, to make sure the email addresses are safe and secure.
Finally, take the time to properly dispose of your hardware. Failure to properly destroy hard drives, for instance, can lead to your customer’s information falling into a stranger’s hands.
Reputation and Market Management
Another way to reduce your startup risks is to take time to manage your online reputation and marketing strategies.
It may be less straightforward than simply destroying a hard drive or signing up for a safer email marketing service, but making efforts to both establish a positive reputation and properly reach your target audience are great ways to address market risks inherent with an online business.
There are many different ways to appeal to your target audience online. Take the time to poll your readers or conduct customer surveys in order to learn more about your readership.
What are their likes and dislikes? Why are they attracted to your site? What can you do better?
As you learn more, you can make your site more appealing and mitigate the risk of failing to reach your intended audience.
There are other things you can do when it comes to your online reputation, too.
For instance, it’s wise to always respond to reviews, whether negative or positive, as 90% of consumers claim to read reviews before visiting a business, and 72% of them will only take action after reading a positive review.
Take the time to cultivate your reviews by thanking positive reviewers for their feedback and addressing the concerns associated with negative feedback.
Also, consider hiring influencers to help promote your brand (and your reputation by extension) in a positive light to their followers on social media.
Protecting Your Product
If you’re a blogger, one of your greatest assets is your blog. This contains your intellectual property, your authoritative content, and a good deal of your marketing collateral. It is also likely the hub of your online operations.
In order to mitigate the risk of something happening to your blog, take the time to create a business continuity disaster preparedness plan specifically for your blog.
Consider what threats your blog faces — from natural disasters, cybercriminals, or anything in between — then come up with a plan for if and when things go south.
Business Insurance
Finally, if you’re looking for an all-inclusive way to minimize the risks that your online business faces, consider getting a form of online business insurance.
This can give you the peace of mind that your company will be protected from things like data breaches, business liability, or other covered financial losses.
Wrapping Up: Online Business Risk Management 101
There are risks associated with any online business. Whether you’re talking about disagreements between company owners, quality product development, reputation management, or a host of other concerns.
The important thing is that you take the time to identify the particular risks that you face. Then assess the dangers involved, and take appropriate steps to eliminate, reduce, or address each concern.
