I wrote an article on understanding the risks of business ownership some time ago but I wanted to revisit this topic under the heading of "Business Risk". The more I think about Business Risk the more I think it is valuable for the business owner to understand what Business Risk means. As I see it, especially in this so called "New Economy" the business owners must be more sensitive to risk than ever before.
When you are a business owner, risk is all over the place. The critical element that keeps your sanity is your assessment of that risk. What should be going through your mind is whether the risk you are assessing is mild, concerning or severe. Just by opening up for business and putting the lights on there is risk. Every single day you are likely to encounter at least one (likely more than one) of the following risks:
Not Buying Equipment
Not Leasing Equipment
Not purchasing inventory
Not hiring employees
Not incurring debt
Do you see where I am going with this? Every decision you make whether you do something or you do not do something carries risk. This is by no means a complete list! I could go on and on with inventory mix, collections of accounts receivable, choosing suppliers and so on. This is why it is so challenging to be a business owner. This is why it takes a certain mentality, a certain make up and a certain mindset to be a business owner. The job of the business owner and CFO is to assess each and every one of these risks. If the risk is severe or cannot be tolerated then the risk must be mitigated.
Do you see why the business owner needs help with this? Do you see why the Chief Financial Officer can play such an important role no matter what the size of the business is? Even in the smallest of businesses these risks need to be assessed and mitigated if severe.