Risk and uncertainty are constant companions for leaders, particularly in modern business. Global economic downturns, unexpected market shifts, technological advancements and other rapid changes call for adaptability and strategic finesse.
While risk cannot be completely eliminated, knowing how to manage it can help leaders guide their companies to long-lasting success, no matter the external circumstances. Below, 20 members of the Forbes Finance Council share their secrets to effectively managing risk and uncertainty in business operations.
1. Connect With Peers
One way to manage risk for your business is to connect with a community of entrepreneurial peers to discuss opportunities and challenges. Talking with others can help you identify potential challenges, as well as ways to address problems with your business. Additionally, peers can be an invaluable support system in helping you push through entrepreneurial risk and uncertainty. – Allison Kelly, ICA Fund
2. Be Proactive In Identifying Risks
In the fast-paced business landscape, it is crucial for leaders to be proactive in identifying and managing risks, turning challenges into valuable opportunities. This can be achieved by strategies like diversifying operations, fostering continuous learning, ensuring financial stability and leveraging technology for real-time risk monitoring. Open communication and regular strategy reviews are also essential. – Michelle Austin, Keegor Group of companies
3. Leverage Data And Embrace Failure
There are two approaches that stand out to me when considering how to effectively lead through tenuous periods. First, adopting data-driven approaches will allow for more informed decisions and predictions. Second, embrace periods of failure as opportunities for hard lessons and growth. These periods prompt introspection and lead to huge growth opportunities, personally and professionally. – Bryan White, Isaiah 117 House
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
4. Evaluate Processes And Performance
Performance doesn’t always mitigate risk in business operations—however, it is one heck of a litmus test. Leaders should be evaluating the income-producing processes while trying to turn their expenses into income. Risk is one of those things that is often overlooked in good times and under a microscope during bad times. Make managing risk to your business operations a daily habit. – Quinton Harris, Bank of England Mortgage
5. Accept Risk And Uncertainty As Constants
One of the best ways to effectively manage risk and uncertainty would be to look at both as a constant part of business and life. Being able to live with constant degrees of uncertainty and managing risk appropriately is an essential skill of future leaders. – Vlad Spiridon, Novartis
6. Have A Past, Present And Future View
To be effective, leaders need to have a past, present and future view of their operations. Accomplishing this requires detailed documentation, fully accurate data and a regular process for review and improvement. With those in place, managing risk moves its primary focus on monitoring, and scenario analysis to one that predicts and anticipates unknown or even novel risks. – Edward Dellheim, Point B
7. Prioritize Resilience In Leadership
Risk and uncertainty are as inevitable as death and taxes! Teach your leaders to be resilient and action-oriented, and manage your business such that cash is available to weather uncertainty— either by generating positive cash flow or having the ability to raise capital. – Anisha Madan, Emids
8. Have Contingency Plans
If Covid has taught us anything, it is to have contingency plans. Plan for business disruption and add multiple revenue streams. Leverage technology for efficiency. Be conservative with your spending, and be ready to make quick changes with proper internal controls and company communication. Consult with your other company leaders to help you understand your business from various perspectives. – Dave Sackett, AIOne, Inc.
9. Maintain A Risk Register
Whether your organization is large or small, it’s important to maintain a risk register that defines all company risks (financial, people, business, technology, compliance). The risk likelihood should be assessed, and prioritization should be placed on mitigating the most impactful and likely risks. Make this an ongoing process. – Jamie Ellis, Katz, Sapper & Miller
10. Manage Cash Effectively
Cash management plays a critical role, ensuring there is a reserve to fall back on in case of hardship. Leaders must embed cash-conscious behavior into every new hire, and ensure that they have visibility and control over cash flow to help spot issues before they begin or spread across the enterprise. A lack of financial resiliency is an active threat to the survival of a business. – Lee Henderson, EY
11. Conduct Market Research
In the startup world, both risk and uncertainty are inevitable. While it is impossible to eliminate the risk element, founders can definitely be proactive in managing it. Conducting thorough market research before launching a product, having a strong team invested in the success of the venture and minimizing fixed costs for greater agility are just a few ways to tackle challenges proactively. – Lise Birikundavyi, BKR Capital
12. Take Action
Uncertainty in business occurs when individuals are too cautious. Contrary to what most may think, promoting a “fail and fail quick” mentality helps businesses manage risk and double down on strategy. I encourage leaders to take action and not be plagued with paralysis through analysis. In short, don’t overthink it! You can pivot as needed when you collect more information —but it all starts with taking action. – Austin Mac Nab, VizyPay
13. Pivot In The Face Of Disruption
Leaders must understand the importance of pivoting when disruption comes to their space. When Netflix approached Blockbuster with a joint venture, Blockbuster failed to act and went bankrupt. Run your business with the thought of “What would it take to put me out of business?” and your odds increase big time. – Leo Kanell, 7 Figures Funding
14. Conduct Regular Risk Assessments
This can be done with a combination of processes, data-driven decision-making and comprehensive tested backup plans. By conducting regular risk assessments, leaders can prioritize and mitigate risks proactively. With proper preparedness and strategies in place, leaders can position their companies for success in an ever-evolving market. – Christina DeSimone Nappi, The DeSimone Agency Inc.
15. Understand Known And Unknown Risks
Leaders generally always manage two types or risks: known and unknown. Articulate a clear strategy and plan for known risks to your stakeholders at all times. Unknown risks are inherently more challenging; however, by continually assessing the risk landscape for emerging risks, you can quickly identify and mitigate risks. Staying proactive and agile in today’s uncertain operating environment is key. – Matt Bochenek, Avant
16. Practice Scenario Planning Exercises
Scenario planning allows leaders to successfully manage risk and uncertainties. Leaders need to carry out scenario planning exercises to prepare for different possible outcomes and uncertainty. This entails developing and analyzing various scenarios to understand their impact on the business and establish appropriate response plans. Leaders should also cultivate a risk-aware culture. – Geanette Rodriguez-Ojeda, GRO Accounting and Tax
17. Communicate And Collaborate Across Your Organization
Mario Andretti once said, “If you feel like everything is under control, you are not going fast enough.” To manage risk and uncertainty in business operations, it’s important for leaders to have clear communication and collaboration with their colleagues. This means engaging in discussions and seeking input from people at all levels, even on topics where they may not have direct authority. – Matthew Barbieri, Wiss
18. Control Your Clients And Your Growth
Constantly assess risk and search for opportunities to overcome that risk in your business. One way to do this is to limit the amount of high-risk clients you take on. Another is to control your growth. For my own company, we dial back on ad spend when necessary so we can focus on serving current clients as best as possible, in addition to making sure our sales team has the bandwidth for calls. – Ryan Carroll, Wealth Assistants
19. Embrace Advanced Technology
Effective management of risk and uncertainty in business operations is crucial for leaders to ensure stability, growth and long-term success. Staying agile and responsive to changing conditions is key. Leaders can embrace advanced technology, such as data analytics and artificial intelligence, to enhance risk assessment, prediction and response capabilities, enabling more informed decision-making. – Peter Goldstein, Exchange Listing LLC
20. Don’t Be Afraid To Take (The Right) Risks
Risk is a funny thing; the business leaders I know who push the “higher risk, higher reward” narrative are the ones who succeed. Managing risk absolutely needs to be there—but without taking massive risks, you won’t get the massive results that we all want. As an entrepreneur, that “gut” risk feeling is something you can’t explain. Go with your gut. – Will Murphy, Everlasting Capital
