Business is risky. Not many people would deny it.
When you start a business or invest money into one, there’s a chance you will not see a return on that investment.
Or worse, it could even completely fail and that investment is down the drain.
But these ‘internal’ risks are not the only things businesses must be wary of. To put it in a car analogy, “there’s other drivers on the road to watch out for!”.
This post is about the swerving, drink-driving, hard-braking and tailgating other drivers on the road.
Ok, enough with the analogy. What we are saying here is that the risks in doing business, are far from limited to internally-controlled risks such as:
- Delivering products and services to a required standard,
- Hiring the right people,
- Choosing the right marketing strategy, etc.
Many risks are external i.e. risks inherited from other businesses that you deal with.
Key examples of risky business include:
- If a business that owes you money goes into insolvency and can’t pay you
- If you are associated with a business that has a bad reputation e.g. involved in illegal or immoral activities (and thus affects your reputation)
- Businesses that have a track record of pursuing aggressive legal action (which could happen to you!)
These are just a few!
Making your dealings less risky
Now, even though these risks are externally originated, that doesn’t mean that they cannot be controlled.
These risks can be proactively monitored by undertaking initial “on-boarding” risk assessments for new clients/customers before you begin working with them and enter any agreements. Then these risks can be managed by either continually (or at set intervals) reviewing the business’ risks and worthiness as a customer/client.
This risk management activity typically involves research into a business on a number of fronts including:
- Reviewing its directors and key management people
- Reviewing banned directors registers
- Checking legal registers
- Checking insolvency registers
- Researching recent company news
- Researching intellectual property holdings
- Finding out the entity/legal structures of the business and its associated group
- Checking its social media presence
- Reviewing credit profiles, etc.
CommercePipe provides many datasets such as from ASIC and the Australian Business Register which can help you undertake these checks.