Risk-management is an indispensable adventure that every Nigerian entrepreneur must be familiar with.
It is the identification and evaluation of potential business risks and providing remedies from disrupting your business activities.
This write-up aims to give you insights into how to face, accept, and manage risks as an entrepreneur in Nigeria without affecting your set-goals.
Table of Contents
Why Business Risk management?
Risk management is an unavoidable venture for Entrepreneurs.
Both new and old entrepreneurs need to understand how to manage risks. Risks are a part of businesses.
Many businesses tend to crumble at the startup stage. This is often because of a lack of literacy or knowledge of how to manage risk in businesses.
What is Risk Management?
Risk management is the identification, evaluation and prioritisation of unforeseen circumstances that can affect your business.
It is the coordinated and economical application of resources to minimise, monitor, and control the probability or outcome of unfortunate events.
How does Risk Management work?
Understanding how risk management work helps you prepare your business against Risk or possible threats against your business.
It helps you identify the kind of Risk you are facing and potential solutions you can offer to minify the problem.
insight: The essence of managing risks is not to guarantee a successful outcome, but an excellent preparation to yield a successful result.
Why you need risk management as an entrepreneur in Nigeria
Risk management for an entrepreneur in Nigeria is crucial.
It is as good as the bedrock of the business.
The country is still yet to attain is capability. And it will be unreasonable for an entrepreneur in Nigeria to plan without looking at storming blocks in his environment.
The sustainability of a business is also another importance of risk management in Nigeria. An entrepreneur who intends to be around for long needs risk management.
The dynamic situation of businesses across Nigeria leaves it unpredictable. What works and yields enormous profit this year might be third on the ranks by next year.
It is, however, advisable that the field an entrepreneur decides to embark on should prepare him for any surprise through risk management.
The application of risk management in a business in Nigeria has made the company hit a massive start without starting yet.
Businesses that do not apply risk management in Nigeria have started failing already without creating.
If entrepreneurs in developed nations use risk management, then a successful business must apply risk management for the company to be a worthy investment for its owner.
Types of risks in Business management
Your environment pose some risk to you as an entrepreneur.
For example; an entrepreneur who want to start a portable water business. He needs to consider how to manage the business when there is no constant supply of water.
Or if there is heavy rainfall; will the environment be the same?
Does he have to employ human resources to sort things out in case of erosion? Preparation for such environmental factors will prepare him to tackle the problem when the problem arises.
It also helps him decide on steps to take as regards his financial capability.
Security and fraud risk
The Nigerian government does not offer much security and protection compared to developed countries.
This means an entrepreneur in the country needs to take additional actions for the protection of his property.
If he plays as if he is in a developed country, then his business is more likely to crumble. I strongly advise entrepreneurs to manage security risk first. As well as fraud.
Financial Risks are monetary risks. What happens if the returns are meagre? Is bankruptcy avoidable?
These are some of the questions business owners need to reflect on when starting a business. An entrepreneur has to have what I choose to call a “Safe lock”—a certain amount of money to prepare for the worst.
A survey has shown that entrepreneurs who fail and end up bankrupt either have no safe lock or used their secure lock on the business.
Meanwhile, it is a wrong approach. The moment you have to start spending your safe lock, it is time to reduce productivity or distribution, relax and research what could be wrong.
This process effectively minimises financial risks for an entrepreneur. In Nigeria, you might have to apply this approach more than once.
Machine or labour risks focus on humans or technology or both.
Entrepreneurs must understand that humans and machines can breakdown anytime. What happens when they do unexpectedly?
You have to prepare to get a new device in case of breakdown. Or have on standby if you have the financial capacity.
In the case of manual labour, a breakdown by an individual will slow down production not halt production like a machine will do. This concludes that machine risks need more management.
Stages of Risk management in business
There are 5 stages of managing Risk in industry. This includes:
Identification of the Risk is the first stage you need to take as an entrepreneur. You need to understand the kind of Risk if posing a threat in your business.
Analyse the risk
After you must have identified the Risk, the next step is to analyse it.
It is essential to know the link between the Risk and how it affects the business.
If this Risk occurs, does it reduce or totally affect your production? Does this Risk put the business in a very critical position?
Analysing the risk will further attach a quick but calm approach towards the survival of the company.
Join our community to get updates on free business webinars to reduce the risks in your business.
Evaluate/rank the risk
Risk pose different challenges for business, and it is essential to rank it accordingly.
Most entrepreneurs rank risks from the lowest to the highest on their risk management list or vice-versa.
It does not matter how it is organised. Ranking helps the entrepreneur to know how serious each Risk is.
A chance with low impact is ranked low while a risk like theft which will result in a huge loss is ranked high. It gives the entrepreneur a whole look at all his risks and how to approach.
Treat the risk
Every risk needs to be eliminated and contained as soon as possible. In a developing country like Nigeria, the Risk of theft has to be managed immediately by employing security personnel.
Risk of erosion needs to be treated with drainages. Also, a standby generator will solve the problem of inadequate power supply.
Monitor/review the risk:
You cannot eliminate all business risks; however, you can minimise them.
For example, a threat like market risk cannot be eliminated, as there will always be a rise of competition, especially in a populated country like Nigeria.
However, you can come up with a price strategy.
Or better still; consult experts in your niche. The saying that no man is an island is also applicable in entrepreneurship.
Potential challenges of risk management in Businesses
Application of risk management may seem complex, but it protects the business from failures.
Determination and acquiring a goal minimise the potential problem in business risks.
It makes an entrepreneur aware of what could go wrong but still going ahead because it protects the business.
With that being said, what are some of the problems of risk management?
Risk management is not accurate.
The size of loss being calculated or prepared for might be smaller than the end result in losses. This puts the business and the entrepreneur in a state of confusion and disarray.
Failure to take known risks into account
In a country as unpredictable as Nigeria, it is hard to conclude or prepare for future occurrences which sometimes affect and make entrepreneurs ignore the known risks.
Lack of communication
Communication is essential in business. It helps an entrepreneur on how to manage Risk.
It is always a good idea to seek help and advice from an expert in the field. Lack of communication from an expert can cripple the risk management process.
Lack of preparation
Risks are as dynamic as the Nigerian system. These risks can change or appear faster than the practice, which becomes a barrier to the successful risk management process.
Nigeria as a developing country, Entrepreneurship is one of the leading factors contributing to its economy.
This makes entrepreneurship a welcome innovative and well-appreciated venture in the country.
With proper application of risk management in Nigeria, a business is set to thrive and shoot beyond its expectations.
Would you like to learn some online money-making ventures with useful resources and a helpful community to manage potential risks? Join our whatsapp community here.
About the Author
Ademola Adekanmbi is a helpful content writer. He does more than just insert commas. He is addicted to innovating new ways of delivering amazing content to the digital space. He listens to 2pac or plays video games when Arsenal FC is not out there to make his heart race.
- Op-Ed are articles published by guest authors. We no longer accept guest posts. However, we are still open to adding long-term content contributors to our team of insightful writers. To write for us, please check out inisght.ng/guest-post.
- Business InsightsAugust 24, 2023Building a Portfolio Website: The Ultimate Guide
- Business InsightsFebruary 24, 2023How to Make Money on Facebook as a Nigerian
- LifestyleFebruary 15, 20235 Best Productivity Apps to Enhance Your Productivity
- OpinionFebruary 10, 2023Best night Browsing data plans popular Networks for Freelancer and entrepreneurs in Nigeria