Business Risk and Risk Management

Risk taking is a skill possessed by the savviest entrepreneur. Research shows that entrepreneurs who take risks are more likely to succeed. Many individuals have a great creative ability to formulate wining business plans and ideas, however they fall into the trap of questioning their likelihood of success, causing a great ideas to become discarded as they feel it might be too risky. It is human nature to fear the unknown however it is vital for individuals to overcome this fear when in the business environment.

Many businesses reject high risk ventures without giving them a chance. Playing it safe might seem like a very sustainable business methodology, however failing to push the norm and create unique products and services will make it difficult to distinguish your company from your competitors. Businesses in these situations often get left behind their competition, until eventually there last chance is to risk their existence on something unique in order to attempt to get back on top in their market, by which point their resources are depleted on trying to stay afloat. Businesses cannot afford to wait until their business begins to dwindle before they work up the courage to take some risks.

Most business employ risk management techniques to aid them in there decision making processes. Potential profitability if compared with costs showing which path contains the lowest risk with the highest return. While this prioritising is an effective strategy, it should not be used on its own. Often the most profitable ideas are the ones that are the riskiest and through this form of risk management one would never be able to take advantage of them. Splitting your budget where a small amount is devoted to the high risk ventures while reserving the majority for your standard low risk, high return ventures will open your business to the vast potential presented by high risk projects while providing the security of the low risk ones.

Dangers of Fast Business Growth

Every business strives to grow as fast as possible in the hope that it will satisfy its shareholders. What most managers forget is that there are dangers to fast business growth.

Communication breakdown between employees is such a danger. As new employees are recruited, previous employee relationships are neglected to make room for interaction with new employees. A small business where every employee was well a ware of the company’s actions suddenly turns into a segmented entity where individual employees no longer understand the direction of the company.

To avoid communication breakdowns, a well structured communication network should be applied. Ensure that vital decisions made by the directors are echoed throughout the organisation. Additionally, various business departments should have regular meetings both for employees within that department and between various departments so that the goals complement every department.

An even more critical danger is the absorption of all of the businesses credit into its products and services, arriving at a situation where sales are booming but there is no money left to purchase more raw materials making the business insolvent. Always make sure to even working capital in your business account at all time!

Operations: Improving Business Efficiency

Many businesses are very inefficient in their operations. The reasons vary from simply not having anyone to review their processes or following processes simply because that is the way they have always done it.

Critically analysing your operations can have the single most impact on your businesses competitiveness. A business should have regular reflection intervals where some or all of the employees brainstorm about what aspects of the business are not optimal.

Alternatively, a business might consider contracting a consultant to analyse and identify possible improvements to your businesses operations. It is often effective to get someone external to the organisation, as they have not been moulded by the “status quo”, enabling them to see improvements where employees cannot.

Time wastage is one of the most common areas of improvement. It is advisable that you check your business processes for and instances where one employee is waiting for another to complete a particular task. Work should be spread out amongst all employees so that everyone is constantly busy, and therefore constantly adding value to the business.

How the Office Environment Affects Employee Performance

The environment an employee is in can have a large impact on their performance levels. The average business conforms to the usual formal office environment: desks, chairs, and computers. This provides a very dull environment that can in some circumstances prohibit creative thought. So how can this be improved?

Office Temperature

Room temperature can have a profound affect on an individual’s performance. It is recommended that a cooler air temperature is to be maintained, as this increases brain efficiency and delays fatigue. A hot environment will cause the body to start to shut down to prevent overheating, making it increasing difficult to maintain concentration. Don’t try to save on the air conditioning in summer and overdo it with the heating in winter!

Creative Inspiration: Aesthetics

One of the most creative industries is the marketing and advertising sector. Visit the office of such a business and you will see an array of rooms all with their own themes filled with art, toys, gadgets, technology, music, literature, you name it, they got it. The more items you can cram into an office the faster your employees will be shouting creative ideas. This is because the objects and images act as a stimulus, bringing up memories, emotions, and experiences.

While some businesses cant afford to have such a wild office environment, why not at least provide plenty of paintings, pictures, and decorations.

Drinks, Snacks, and Breaks

Providing drinks and even more importantly snacks will allow your employees to maintain a constant energy level throughout the day. Encouraging healthy snacking every 2 – 3 hours will reduce fatigue and encourage short breaks. Many businesses understand the importance of employees taking short breaks to aid their concentration, however often they have a hard time enforcing it, especially as employees would rather get their assignments completed as soon as possible without being disturbed. Introducing snacks will give them the catalyst needed to let themselves take that all-important break.

Power of Business Partnerships

The business world is a very competitive environment. Managers stay focused on outperforming competitors and often completely ignore the potential benefit in cooperation with other businesses.

A variety of partnerships can be formed ranging from a simple trade of advertising space in a shop window, to the co-sponsorship of an event. A great example of partnership can be seen in the aviation/leisure industry. Many airlines partner with businesses that share the same customer base. These include airlines, car rental, hotels, etc.

With the win-win scenario that partnerships possess one cannot afford to let the opportunity slip by. Form partnerships before the competitors beat you to it. Any industry can benefit from partnerships no matter the product or service.

The benefits often include increased advertising exposure, affiliation with a powerful brand, and even can be taken as far as sharing key organisational resources including employee training programs, the list is endless.

One thing is for certain: Businesses comprise of the cooperation between individuals aspiring towards a common goal (profit). This can be extended from individuals to businesses. Why not take the power of cooperation to the next level?

Effective Small Business Marketing

There is popular belief that the average small business just can’t compete with the large advertising budgets of larger businesses. While this is difficult to argue against, the extend of the financial disadvantage is usually overestimated. There are many marketing techniques that small businesses can employ to develop a highly efficient advertising campaign on a small budget. While larger businesses have certain inherit advantages such as economies of scale, small businesses possess similar benefits that large organisations can never match.

Small businesses tend to have a much smaller customer catchment area providing the means for a highly targeted marketing campaign. Additionally, every sale a small business makes is proportionately more valuable than that of a larger organisation.

Many small business managers identify the need to market their product or service, but often struggle when inventing an effective marketing campaign. Some common misconceptions are:

• Thinking too big
• Not keeping it local
• Lack of market research

When designing a marketing campaign it is critical that one puts themselves in their customers shoes. The aim is to identify a balance between product exposure while not annoying the customer and cost. Some forms of advertising such as door to door selling will cause a nuisance to potential customers, and which can create a negative interpretation of your brand/business. A good example of this can be seen in spam mail/e-mail or door to door selling. This does not mean that these methods should be avoided, in fact they are very effective low cost advertising methods however they must be well planned and used conservatively.


Other sources of low cost advertising may include:

• Local radio station commercials
• Partnerships with local businesses (discounts when shopping with partnering business / Exchanging advertising)
• Sponsoring community events
• Affiliate programs (referring/referred friends get a discount)
• Customer loyalty rewards
• Freebies to targeted market

The list is only limited to ones imagination. Anything that can catch people attention will be a beneficial piece of advertising. One should first identify the different advertising possibilities and then identify which of those are the most cost effective. These will be the ones that posses the lowest implementation costs while obtaining exposure to the highest number of potential customers that fit ones target market.

Employee Motivation: Appraisals and Reprimands

While machinery can operate at peak efficiency with relatively little maintenance, employees demand far more support to reach their full potential. As a manager or team leader one must understand how to support his or her employees in order to encourage optimal performance and keep everyone motivated.

An autocratic management style where mistakes are punished is unfortunately still widely used in many businesses. In order to prevent a reduction in employee motivation, it is important to place rewards above reprimands. If the need for a reprimand arises, a short but detailed reprimand should be given to the employee, followed by a short comment regarding your belief in the future performance in the employee. This serves as an effective notification of their error, while giving them the encouragement to achieve an acceptable performance level in the future.

It is vital to give regular rewards to employees after a good performance. Rewards should be aimed to out way reprimands whenever possible. Additionally, it is important to not over reward an individual or team as this can result in a reduction in the value of future rewards. Furthermore, when a verbal appraisal is given, the appraiser must specifically state in detail the reason for the appraisal, otherwise the individual might begin to feel that the appraisals are empty and meaningless.

The optimal scenario is to prevent mistakes taking place altogether. The main source of mistakes is caused by an inefficient explanation of the task presented by the superior. It is crucial for and manager to spend time with the employee or team that they want to performance the task and together set the goals that need to be achieved. Time should be given to sort out any misunderstandings and questions at this stage as this saves both the employees and managers time in the future.

Who comes first: shareholders or employees?

Every profit seeking organisation is under constant pressure from their shareholders to deliver results. All business investors seek to get a return on their investment, unfortunately this can create a management style where the need to maximise profits results in excessive pressure on the employees.

While investors only calculate numbers and financial forecasts, managers must deal with the human aspect of business, and quickly find out that what might be in the best interests of the company finances, is not always in the best interest of the employees.

There are many factors that effect human performance, namely motivation, fatigue, mood, recent occurrences, and many more. What is critical for any manager or fellow employee to remember is that the balance of these factors that make up a persons mood is always in fluctuation. A few negative effects on an individual and you might see some unpredictable and later regretted behaviour. Everyone has had an incident where they became angry and said or did something that they came to later regret.

As a manager and fellow employee, one must identify when individuals are under stress and provide extra lenience for that day of work to avoid potential conflict.

One can get lost in the business environment focusing on profit instead of people. These individuals often forget that the people are the business and make the profit. Your employees are the businesses greatest assets. If one focuses exclusively on profit generation at the expense of their employees, they will soon loose their only profit-generating resource.

Business & Commerce

The foundation of commerce dates back to the dawn of man. A time when man took over from the dinosaurs to rule the earth with the help of his bank balance, creating the only mutual purpose shared by all men.

The universal language of commerce is pursued by all cultures, accepted within any religion, society, or culture, it is the only true link between the differences of man that culminate in the mutual benefit to all.

It is for this reason that I the business nerd, devote this blog to the followings of business and commerce in the hope to bring peace and prosperity to the world through the stimulus that is business.

Follow my teachings and let your business blossom into the most profitable ventures in existence!