How Can Risk Management Decisions Reduce Potential Losses?
To understand key risk management decisions that have significantly reduced potential losses, we asked risk professionals this question for their insights. From specializing in a niche market to evaluating investment returns regularly, here are the top four strategies shared by business development managers and CEOs.
- Specialize in a Niche Market
- Conduct Thorough Due Diligence
- Implement Affiliate Screening Procedures
- Evaluate Investment Returns Regularly
Specialize in a Niche Market
As the owner of Stance Commercial Real Estate, I have steered many risks over the years. One significant decision that reduced loss was choosing to specialize in a niche market. By focusing solely on commercial real estate in Riverside, CA, my team became experts in the local market.
When the economic crisis hit in 2008, our specialized knowledge allowed us to advise clients on the best strategies to weather the storm. For example, we helped a client negotiate with their landlord to lower rent for 2 years in exchange for signing a long-term lease. This allowed the business to stay open, and today they are thriving.
An expert, localized approach has been key to mitigating risk. Detailed property inspections uncover issues early, and strong tenant relationships mean higher retention rates. In one case, a client called about a roof leak in their building. Because we knew the property well, we were able to send a contractor immediately to patch the leak and save inventory that could have been damaged.
Focusing on a niche market and building close relationships has been instrumental to risk management. My team provides in-depth advice to help clients avoid poor investments or dangerous liabilities in the first place. When issues arise, our familiarity allows for fast solutions that reduce loss. The risks may be high in commercial real estate, but with the right strategy, they can be managed.
Conduct Thorough Due Diligence
As an attorney focusing on business law, risk management is key to protecting clients. One decision that reduced losses was counseling a client to conduct due diligence on a potential buyer for their tech startup. The buyer was offering an attractive price, but their financials raised red flags. My team investigated and found the buyer was highly-leveraged, reliant on speculative funding, and had defaulted on prior acquisitions. We advised our client to walk away from the deal. Within a year, the buyer went bankrupt. If the sale had gone through, our client would have lost their business and the purchase price. Thorough due diligence, even when it’s not the answer you want, is essential to risk management and safeguarding businesses.
Another client wanted to cut costs by dropping cyber insurance. We argued it left them exposed, given client data they stored. They kept the policy, then suffered a data breach months later. The insurance allowed them to notify customers properly, avoiding major legal issues. Risk management requires seeing around corners and planning for worst-case scenarios. It’s not exciting work, but it’s fundamental. The costs of not doing it right can be catastrophic.
Implement Affiliate Screening Procedures
Handling risk in affiliate marketing is crucial to protect profits and the network’s reputation. A good strategy is thorough affiliate screening and real-time monitoring to prevent fraud, like fake leads, ensuring compliance with advertising standards, and avoiding financial and legal troubles.
Evaluate Investment Returns Regularly
Our organization continuously evaluates the return on our investments to prevent future financial loss.
We recently analyzed customer interest in industry events, where we typically invest in a booth for in-person outreach. Our team observed a significant decline in event attendance over the past year, as preferences point toward virtual engagements. With this data, we decided to scale back our investment in physical events for next year and redirect our resources toward enhancing our digital-marketing efforts.
This data-informed decision mitigates the risk of low ROI and opens new doors to engage with our audience online and on a broader scale.
