Risk is a healthy part of any business, large or small. From day one, students in Utica College’s MBA program learn how to navigate risks, with a cross-functional curriculum and a specialized area of focus, such as cybersecurity, cyber policy, insurance and risk management, or accounting.
One lesson they learn is that the only certainty is what’s unknown. No matter how much of an expert you are in your field, it’s impossible to fully predict the risks of all situations, such as the consequences of a new product failing, potential cyberattack timing or a key employee quitting.
There are a number of steps that managers can take to handle potential business risks and vulnerabilities. Here are three:
1. Involve Legal Teams Early
Know your risks before you enter new terrain. As Sean Butler, senior corporate counsel at Cisco Systems points out, many business leaders are afraid to work with lawyers for fear of initiatives getting shut down.
But would you rather wait until the very end of a project—when you’ve already invested in development, personnel and infrastructure costs—to become aware of pressing legal risks?
By involving legal teams during the consulting stages of a project, business leaders can better understand potential gray areas to avoid. Simple legal awareness can help direct companies away from potential dangers.
2. Create a Sandbox to Run Experiments
One of the biggest ways to manage risk is to separate new initiatives from your business’s core revenue drivers. Instead of putting the reputation of an established product, your company’s bread and butter, in jeopardy, create some separation.
This management strategy will allow you to give new business initiatives the time, space and attention that they deserve. For instance, Comcast Labs-- a division of Comcast - is devoted to developing new technologies for the future. The business arm is separate from the organization’s core services, serving the dual purpose of giving space to innovation and mitigating potential risks.
3. Get Big by Starting Small
Companies will often spend years bringing a new product to market. But if the launch flops, it’s an epic waste of resources.
One way that companies can avoid potential risks is to run a series of smaller experiments. Instead of waiting until the full product is ready, get an earlier version into the hands of your target customers -- as a beta. Collect data to identify potential areas of improvement and to study the alignment with your core business.
Consider a case study from AppFolio, a company that makes software for property managers. After launching an experimental product, AppFolio decided to switch gears and pursue another business direction. It was a small test that allowed the AppFolio team to recognize that its new venture was risky as an opportunity cost and distraction from the company’s core business.
A small experiment can help you collect data and minimize business risks as a result.
No matter how much time and resources you take to prepare your company for potential business risks, the harsh reality is that you will never be fully prepared. Knowing this, you should realize that the best way to maximize your chances of success is to invest in your education, get comfortable with uncertainty and embrace risk as the new norm in business.
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