Risk Management: Why Failure Isn’t So Bad
In business, success is never guaranteed, so failure should be considered as part and parcel of entrepreneurship. It’s not failure itself that is bad, but it’s failing to learn from your mistakes. Taking mistakes as lessons is one of the surest ways to eliminate mistakes and avoid long-term failures in business. Although it is easier said than done, every entrepreneur should learn how to reap positive lessons and insights from their mistakes.
Learning from Your Mistakes in Business
Many people want to enter into business but the fear of failure discourages them from doing so. They can’t help but ask ‘what if I fail?’ and let that question form an endless string of doubts that eventually dissuade them completely from pursuing their business interests.
But many seasoned entrepreneurs can tell you that underneath every mistake is a valuable lesson to be learned. In fact, most people tend to remember their failures more, so they are able to learn more from these compared to their successes. Unfortunately, not all entrepreneurs are able to unearth these lessons. Instead, they let their mistakes get the best of them and eventually bring about their failure.
So how can you change your mindset? Well, it’s all about changing the way you approach failures and mistakes. Instead of lamenting over any lost resource and instead of placing blame, take note of everything you learn from every mistake you face.
Changing how you think about mistakes will also help. Consider mistakes as those sudden motivations that ultimately bring about growth. Many successful businessmen, in fact, find greater success when they move beyond what they know and into new territory without heeding the high risk of making mistakes.
Also, instead of being fearful of mistakes, keep in mind that in the course of your business, some mistakes will eventually occur. Nowadays, there is a whole new sector dedicated entirely to reducing the risks of failure that threaten your business. This is called risk management, which is something worth looking into for every business owner.
The Basics of Risk Management
Risk management is, literally, the process of minimizing and mitigating risk. It follows a specific process, which includes:
- Identifying risks – The process of identifying the risks that a business faces
- Risk assessment – The process of analyzing potential losses from a certain risk factor
- Monitoring risks
- Implementing programs to minimize or protect from risks
In your new small business, implement a risk management program by analyzing each risk and determining their likelihood of occurrence and their impact on the business.
Likelihood of occurrence can either be high, medium or low, while impact can be:
- Significant – Significant risks have to be managed at the soonest possible time.
- Moderate – Moderate risks have to be managed and monitored.
- Minor – Minor risks should be accepted and monitored.
Once the risks are identified and estimated, they can be managed and mitigated by implementing a risk management program, which should involve:
- Providing alternative solutions
- Analyzing the effectiveness of these solutions
- Providing the management with information regarding the risk to guide them in their decision-making processes
- Evaluate the outcome for future reference
Proper risk management strategies that are in place can help business owners feel more confident and less averse to mistakes and failures. Knowing that you have programs in place to monitor, control, and respond to mistakes and failures will make you less afraid and will help you grow as a business.