How To Define Your Business Goals And Identifying The Business Risks For Proper Mitigation And Management

Business

Business goals are part of a larger process that starts with the vision and mission of your company and ends with specific goals, objectives, and action plans that help you move your business forward. It is necessary that the maim aim of any business is profit making an profit driven hence the need to outline business goals in order to actualize this end
Business goals is made up of a characteristic called SMART that is :
S( specific):that is giving a precise detail of what a business wishes to achieve whether it is profit making, marker dominance and other possible aim for its establishment.,


M (Measurable): Being able to be quantified in metric by employing some basic analysis tools including charts graphs in order to know whether the business goals are on positive or negative directions.


A (attainable): the business goals should be possible to achieve before a company sets out on a business venture. The company must have done some long term visibility studies which would serve a yard stick upon which the business is built in the first place or else, it heads to a crash.


R: (realistic): It should be able to show a sensible of practical idea of what can be achieved or expected. A business model tool is usually employed in this area upon which the business can be set as standard


T (time-bound): Time is a key factor in the whole universe. Time is precious and as such there should be a time limit to set for the achievement of a basis as goal or else the business is either bound to delay, retrogress or fail as there are many factors to consider for the success of a business including business competitors, employee, employee financial management. This is the reasons every business would have a business year and would carry out business and financial audit and review

Some examples of a business goals are as follows

Getting and Staying Profitable.
Increased efficiency
Increased Productivity of People and Resources. …
Capturing a bigger market share
Excellent Customer Service. …
Employee Attraction and Retention. …
Mission-driven Core Values. …
Sustainable Growth.
However, having a comprehensive list of business objectives creates the guidelines that become the foundation for your business planning in achieving your business goals.

Successful businesses are based on both goals and objectives,

as they clarify the purpose of the business and help identify necessary actions.
Clear cut differences between a business goal and a business objective
Goals are general statements of desired achievement, while objectives are the specific steps or actions you take to reach your goal.
It is pertinent that one does not confuse a business goal with a business objective in that while Business goal is a result that a Company aims to achieve, Objectives goals further to outline the strategies that the company will use to get there and lists the resources available in the operation

Your Financing Goals


Although, not much money is needed in starting a business that will accrue to a profit in your business venture however, diligence is needed to ensure that this is achieved especially, if, as part of examining your goals and objectives, you envision very rapid growth.
Energetic, optimistic entrepreneurs often tend to believe that sales growth will take care of everything, that they’ll be able to fund their own growth by generating profits. However, this is rarely the case, for one simple reason: You usually have to pay your own suppliers before your customers pay you. This cash flow conundrum is the reason so many fast-growing companies have to seek bank financing or equity sales to finance their growth. They are literally growing faster than they can afford.
There are necessary questions to ask in this aspect.
Start by asking yourself what kinds of financing you’re likely to need–and what you’d be willing to accept. It’s easy when you’re short of cash, or expect to be short of cash, to take the attitude that almost any source of funding is just fine. But each kind of financing has different characteristics that you should take into consideration when planning your plan.

These characteristics take three primary forms:


First, there’s the amount of control you’ll have to surrender. An equal partner may, quite naturally, demand approximately equal control.
Venture capitalists often demand significant input into management decisions by, for instance, placing one or more people on your board of directors.
Angel investors may be very involved or not involved at all, depending on their personal style.
Bankers, at the other end of the scale, are likely to offer no advice whatsoever as long as you make payments of principal and interest on time and are not in violation of any other terms of your loan.
You should also consider the amount of money you’re likely to need.
Almost any source of funds, from a bank to a factor, has some guidelines about the size of financing it prefers. Anticipating the size of your needs now will guide you in preparing your plan.
The third consideration is cost. This can be measured in terms of interest rates and shares of ownership as well as in time, paperwork and plain old hassle.

What Is Business Risk?


Business risk is the exposure a company or organization has to factor(s) that will lower its profits or lead it to fail.
Anything that threatens a company’s ability to meet its target or achieve its financial goals is called business risk. These risks could come from a variety of sources, within the firm or they may be external—from regulations to the overall economy and when such happens, the bulk of the blame goes to the manager for not being prudent and cautious enough to see ahead.
Shedding Light on Business Risk
Business risk is associated with the overall operation of a business entity. These are things that impair its ability to provide investors and stakeholders with adequate returns. For example, a business manager may make certain decisions that affect its profits or he may not anticipate certain events in the future, causing the business to incur losses or fail.
Some of the factors that may serve as influences to Business risk include
Consumer preferences, demand, and sales volumes
Per-unit price and input costs
Competition
The overall economic climate
Government regulations
It is also of importance to know that companies are also exposed to financial risk, liquidity risk, systematic risk, exchange-rate risk, and country-specific risk. These make it increasingly important to minimize business risk.
A company with a higher amount of business risk should choose a capital structure with a lower debt ratio to ensure it can meet its financial obligations at all times. When revenues drop, the company may not be able to service its debt, which may lead to bankruptcy. On the other hand, when revenues increase, it experiences larger profits and is able to keep up with its obligations.
To calculate risk, analysts use four simple ratios which are
1.contribution margin,
2. operation leverage effect,
3.financial leverage effect, and
4.total leverage effect.
Analysts can incorporate statistical methods could be employed and incorporated with those mentioned above for more complex calculations.
Business risk usually occurs in one of four ways which are
1.strategic risk,
2.compliance risk,
3.operational risk, and 
4.reputational risk.

Strategic risk arises when a business does not operate according to the business model or plan. A company’s strategy becomes less effective over time and it struggles to reach its defined goals. If, for example, and a company which fails to follow its business model or plan is bound to lose its customers rapidly.
Compliance Risk
. This arises in industries and sectors which are highly regulated with laws. There are different regulatory laws that guide every industry including Food and regulatory laws such as the FDA in the US, National Association for Food and Drugs Administration Control (NAFDAC) in Nigeria, Standard Organization of Nigeria (SON), Export and Imports law of which would meet Customs requirement and so much more.
These laws contains several clauses in their documents that might lead to breach of agreement between the company and these bodies due to violation of these laws thus putting the businesses from risking their credibility ad certificates of operation, sales, transportation and overall imported and exports across boarders and countries.
In a short statement, compliance risk arises when a brand fails to understand the individual requirements, thus becoming noncompliant with state-specific distribution laws.
Operational Risk
The third type of business risk is operational risk. This risk arises from within the corporation—when the day-to-day operations of a company fail to perform. Putting it in another way, operational risk is the prospect of loss resulting from inadequate or failed procedure, systems or policies. Such risks may include
Employee errors
Systems failures
Fraud or other criminal activity
Any event that disrupts business processes
Most organizations accept that their people and processes will inherently incur errors and contribute to ineffective operations. In evaluating operational risk, practical remedial steps should be emphasized in order to eliminate exposures and ensure successful responses. Poor operational risk management can hurt an organization’s reputation and cause financial damage. How much loss an organization is prepared to accept, combined with the cost of correcting those errors, determines the organization’s risk appetite. 

Basic Factors to Consider When writing a business plan


The chances that your business venture will succeed are hinged on a very crucial factor such as your financing goal.
One of the most important reasons to plan your plan is that you may be held accountable for the projections and proposals it contains. That’s especially true if you use your plan to raise money to finance your company. Let’s say you forecast opening four new locations in the second year of your retail operation. An investor may have a beef if, due to circumstances you could have foreseen, you only open two. A business plan can take on a life of its own, so thinking a little about what you want to include in your plan is no more than common prudence.

Any time a company’s reputation is ruined, either by one of the previous business risks or by something else, it runs the risk of losing customers based on a lack of brand loyalty or even going bankrupt. Take the case of criminality in a company where workers of a company involves in several shady deals that are capable of causing a setback of the company in terms of is productivity, financial misappropriation, under reporting or over reporting- action capable if causing discrepancies in records and consequently leading to information displacement and misplacement in terms of traceability.

A typical example would be “ Company A” as a case study.
“Company A” is a production and merchandise company, however, criminality is constantly being perpetrated internally among the workers. This criminalities would be classified into 2 as smooth criminality and pure criminality and we’ll analyze the differences.

Differences between Smooth criminality and Pure criminality in Business

1) Smooth Criminality in Business


Smooth criminality in business is such that when the investor invest a huge sum of money for the purchase of raw materials money at agreed quality of X% and price Y Naira.

The procurement Officer approaches the seller of the goods and they both agree to make the goods at (X-2)% still at Y Naira, bypassing the Quality Assurance Officer (for quality confirmation ) in collusion with other officers of lower cadre.

Loss =[ X – (X-4)]%
Loss = 4%
This loss percentage in price of Naira to the company but gain to the seller, is shared between the Procurement Officer and the Seller agreed ratio lets say ratio 1:2
Meaning Procurement Officer takes (1/3* 4)%= 2.7% per bag at Y Naira
The Seller take (1/3*4)%= 1.3% per bag of 50KG at Y Naira.

Then, the bags all add up to 30 Metric tonnes.
In the first instance, the external marketer ( seller) is involved and

2) Pure Criminality in Business


Pure criminality in business can be described in this sense: is when the investor invest a capital for the purchase of raw material from the market at an agreed price say Q Naira and Quality of Z% and after the purchase of these goods by the Procurement Officer and storage in the warehouse for processing in the machines, there is a general collisions among all the department involved i( warehouse department, QA department, Production department and Security department ) to steal part of these goods and shortchange the company to their own personal and selfish interest .
How is this being done?

THE QA department responsible for the quality declaration before processing before payment is made to the seller of the goods to avoid breach in agreement between the company and the seller would declare a different Quality result as (Z-4)% g, rather than saying its Z%.
Here, the loss to the company is:
[Z- (Z- 4)]% =4%
Where:
Z% is original raw material quality
(Z -4)% is declared result by QA Officer

This loss to company (4)%, translate to some quantities of untouched and unprocessed bags of the raw materials. Loss to Company:
These materials are transferred to the production officer who processes the raw materials to finished products using original Z% as start off and the excess which is [Z-(Z-4)%]= 4%
4% amounts to Untouched excess bags of raw materials probably running to its 100+ bags per consignment.
These bags are sneaked out at night in collusion with the security Officers and sold off at night at a little cheaper price than the market price to the seller. The seller of the raw materials mix these excess bags with new consignments and resell it back to the investor (owner of the company) at the actual market price.

Every attempt to audit and apprehend anyone in these criminal acts are usually covered up such as manipulating the gross and net weight receipts of the incoming raw materials being purchased from the seller into the warehouse while the production officer ,security officer , procurement officer Quality assurance Officer would all do likewise to their records.
The resulting effects would in a long run culminate into a great, loss of reputation and possible bankruptcy and liquidation of the company.
Operational risk can play a key role in developing overarching risk management programs that include business continuity and disaster recovery planning, and information security and compliance measures.

[Important: There are still other risks that can occur infrequently such as natural disasters and weather-related issues for which companies still need to account.]
Key Takeaways
Business risk is any exposure a company or organization has to factor(s) that will lower its profits or lead it to fail.
Business risk comes from different sources including consumer taste and demand, the overall economy, and government regulation.
While businesses may not be able to completely avoid risk, they can take steps to mitigate the impact including the development of a strategic risk plan. Hence the need to implement risk mitigation and management strategies, which would be discussed in the subheading that follows.

Risk management and mitigation techniques


 It is very paramount for businesses in all array of industries to come up with risk management and mitigation techniques and strategies—whether it is implemented before the business begins operations or after it experiences a draw back as it will help guide the firm through any turbulence that the business will experience thus, making the company better prepared to deal with risks as they present themselves. The plan should have tested ideas and procedures in place in the event that risk presents itself.

How to manage Business risks


Although, a company may not be able to defend itself against risk completely, there are ways they can help mitigate the effects of business risk, primarily by adopting a risk management strategy that could cut back the impact. Listed below are the processes the undertake;

Identify risks. Part of any business plan should be to identify an analyze any potential threats to the business. These aren’t just external risks—they may also come from within the business itself.
Be proactive: Taking action to cut back the risks as soon as they present themselves is key Do not wait until the threat blossoms because at this point the risk must have spread to many levels among the workforce and it the process becomes very difficult to tackle successfully.. Management should come up with a plan in order to deal with it head-on before it blows up.
Record the risks. Once management has come up with a plan to deal with the risk, it’s important to document everything just in case the same situation arises again. After all, risk isn’t static—it tends to repeat itself during the business cycle.

Key point: A first step in developing an operational risk management strategy can be creating a risk map — a plan that identifies, assesses, communicates and mitigates risk.

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