All scales of Businesses, especially small businesses are

exposed to risks all the time. Risks can directly distress

daily routines of the business, such as increase in
expenses, supply shortages, cash shortage .Their effect
may be severe enough for the business to fail.
Businesses are exposed to internal risks and external
risks. Mostly, we can control internal risks once we
identify them. Nevertheless, external risks may be out of
our control. In order to manage mitigate the risks, we
need to have risk management plan.
Risk management starts by identifying possible risks and
then implementing a process to reduce or avoid them.
There are mainly four steps in mitigating business risks.
STEP
STEP
STEP
STEP

1:
2:
4:
5:

Identifying the risk.

measuring and assessing the risks.
Managing the risk.
Monitoring the risk

Below are categories and typical risks which small

businesses normally face and action plan to mitigate
them.
Categories/Types of Risks
STRATEGIC RISKS:
Commercial risks;
- Business environment is
a crucial factor to consider
for a first time intending
business entrepreneurs
and new start - up

Action Plan

Ensure that business is

fully compliance with
laws and regulations.
The Entrepreneur also
should be aware of

business. It is not only

about the space we rent or
buy. What happens around
our business has an
impact. A change in laws,
Weather or natural
disaster can shut down the
business.
Stakeholder Risks:
- it is essential to
understand who the
stakeholders are such as
partners, suppliers, etc,
whose actions can affect
the business.

Technology risk:
If the business rely on
information technology
there are certain risks
involved.for example, POS
system fails during
business hour,Infecting
Virus in the system, hacker
attacks etc.

change in laws.
Secure the assets with
security and invest on
a good Insurance plan
Forecast weather
Safety must be
sustained at all times.
It is an internal risk
which can be
controlled. Good
professional
relationships and legal
agreement with the
stakeholders can help
to avoid the risks.
Develop a strategy to
maximize the
satisfaction of
stakeholders.
Protect systems with
firewalls, keeping a
backup system,
protecting systems
with firewall and
antivirus and
safeguarding logging
information could
prevent such risks

FINANCIAL RISKS:
For a small business,
financial risks mostly
involve cash flow
problems, credit problems
and the risk of increasing
costs of the business as a
result of changing market
factors such as supply
shortage and demand
which would increase the
product price As a
consequence, the business
will find hard to compete
in the market. This might
lead to fail the business.

OPERATIONAL RISKS:
Operational risks consists
of people risk and project
risk:
In a new business startups , employees

Make sure that the

financial management of
the business effective in
controlling cash flow.
Keeping strong
relationships with the
debtors, Imposing credit
limits and asking to sign
a terms and conditions
of before providing goods
or services to them.
To deal with cost increase
entrepreneur can :
1.negotiate with suppliers
and come to terms to fix
the prices.
2. Find alternative suppliers
which could supply at lower
cost.

Employment
screening and
background
checks before

discipline and lack of

experience could leads to
mistakes and errors.
Improper managing of
resources, communication
risk can be a typical risk
within the operation of the
business of a new
business.

employing them,
Provide job
descriptions and
giving lists of
duties.
Reviewing and
assessing their
performance in
timely basis.
Balance the
resources by
evaluating and
planning the
resouces such as
labour,equipment
and material
resources
available.make
right decisions
and use right
communication
style.

1. Sales required to break-even

The break-even point is an essential measurement in

understanding the well-being of a business. It is a term
which describes a position in which a business is making
neither any profit nor any loss,which mean the company
is able to pay all of the expenses without any debt. The
main aim of break-even analysis is to know the minimum
output to be produced in order for a business to make
profit. For a start-up or a small business this is vital
information to setup selling price and to know output
amount to produce in order to make a profit.

The organization whether small or large will have a fairly

clear idea of the variable costs and fixed costs involved in
production of goods or services. They will therefore be
able to conduct break-even analysis to find out how many
units need to roll off the production line for sales in order
to achieve break even. (Gello, 2014)
Formulas to find break-even point:

BREAK EVEN POINT = TOTAL COSTS = TOTAL REVENUE

Break-even point in units =

costs
Selling price per unit variable costs per unit

For an example:

Fixed costs per month = $2,000;

Variable costs per unit = $11;
Selling price of a unit = $15;
Maximum output = 250 Units.

Break-even point in units =

costs
Selling price per unit variable costs per unit

$ 2,000
$ 15$ 11

= 2000/4

= 500Units
Table : Break-even analysis
Draw chart here:

http://www.brighthubpm.com/risk-management/33399-stakeholders-riskmanagement-project-risk-assessment-approach/
http://www.investinganswers.com/financial-dictionary/economics/break-evenpoint-54