Is your business prepared for volatility?
If you’re entrepreneur, you know there are loads of business opportunities to gain market share and fill unoccupied niches. But, is your business prepared for the intense risks that come with running a business?
In a risky environment, in order to deal with the risks up front you have to able to identify them and also possess a willingness to prepare for these risks. This applies to not only the risks that you as a business owner have control over, but also macro environmental risks, which are out of your control.
Know where you play
The first line of defense is awareness, knowledge and preparation. So, get to grips with your industry success drivers. Your business may be exposed to currency exchange rates, energy input costs in manufacturing, imports/exports, global demand patterns or sharp consumer swings in luxury or FMCG. If a falling currency affects your supplies, you can prepare by cultivating alternative sources of raw material or by adapting prices timeously.
Know the epicentre
Determine the concentration of pain in the value chain and its migration direction. Proactively plot your business’s incidence to the peeks and valleys as it migrates through the value chain. Furthermore, determine your exposure and manage the cost and revenue risks. A deteriorating exchange rate will hit your import business in early phase volatility, while a deteriorating energy cost will feed cost pressure in second or third phase profit volatility.
There is a whole range of risks that require the constant focus of the business owner, namely loss of a major supplier or client, cash flow drying up or business expenses creeping up. A continuous process of investigating and evaluating the overheads of the business should be done to manage these risks.