Businesses are seemingly Handle-able only at first glance. However, as a Risk Manager for over 25 years, I can categorically state – Don’t get involved with a high risk business unless you have the complete understanding of all the issues and implications it carries.
So, let’s get into identifying some risks and suggest some strategies to overcome them. You will find this information helpful in avoiding unforeseen disasters and misconceptions.
Step 1: objectively Review all the Purchaseable Potential of a Business
As a beginning step, review your options and determine the relationship of your product to a variety of global markets. But, let’s get objective. Are you trying to sell your product or provide your services as a high risk business? At least, it is critical to the success of your business that you do a thorough review.
When you examine a business with the ‘business as usual’ mentality, you take only a cursory note and expect things to work out well in the future. But they don’t. Many of the businesses you point out are portals for sale of illegal drugs etc. Many internet savvy entrepreneurs use these sites to become law abiding, earning them a great deal of money along the way. They continually market their business to avoid any future fallout.
You must have a better understanding on what type of risk your business faces and prepare a report for yourself giving you an idea of the security Risk you face. Few businesses these days carry a higher perceived risk than the United States, but you must also recognize that high risk businesses grow, sometimes exponentially. Becoming successful requires some hard work, but there is no question that if this business is carefully watched, success can be realized.
Step 2: Formulate a Strategy and Advise the Risk
Your strategy should consider and address each of the aforementioned data of high risk businesses. It is critically important that your strategy or approach is not designed to stop all high risk activities, but to monitor and correct it when necessary. That way, you will successfully educate and protect yourself against fraudulent activities, which may involve any of the following:
Also, your strategy should address the following points:
Persuading a lender to extend greater credit to a borrower is extremely difficult. In view of the fact that many accountants are handling a high percentage of loan requests, it can become difficult to get an approval. Of course, if you are truly good at preparing loan requests, you will get more number of approved loan terminations. However, if you want to know about how successful you will be in this endeavor, get an approval rating today using our Loan Approval Accuracy Rating Calculator. This indicator will enable you to demonstrate that you are a low risk borrower, a key factor in obtaining financing.
Step 3: Know About Other Business Risk Factors
As you examine the list of potential high risk business, there is an opportunity to review and summarize the statements or the risks commonly associated with high risk businesses. Let’s deal with a few:
In sum, the issue is not ‘not’ or ‘not enough’ or ‘too little’ or ‘too much’. The issue is ‘what is’ and ‘how is’ in evaluating the risk. Adequate, professional risk assessments are part and parcel of a sound, intelligent approach to controlling business risk.
As a rule of thumb, a business should be 16 reasons away from being classified as a high risk business.
Business to business and business to person relationships
Fee based services
Beware of high cost brokers
increased concentration on marketing and advertising
continuity of staff
INCREASE CREDIT CARD AND LOAN noise
Larger numbers of credit and debit cards
Debit card swiping
A business with a lower than average pre-tax margin
A business with more than 50% owner involvement
Operating without set business policies
A Difficult or High RiskImport & Export market
Operating in an area with poor infrastructure
Operating in areas with poor infrastructure
Lack of rigorously controlled Import and Export Credit Policy and Procedures
Lack of employments policies and procedures
Lack of an effective Executive Management System (E.M.S)
Lack of separate legal structure
Lack of independent banking system
Lack of trusted government and corporate advisors
Lack of a plan for day to day operations
Lack of identifies and portfolio management
Lack of Formed corporate structure
Lack of Investor Alerts
Lack of a Consolidated Fund Reports
Lack of a Consolidated Access to Term Funds
Lack of Consolidated Portfolio Filings and Adjustments
Lack of a written taxi schedule
Speak to your banker for more information
A review of the operations, including the capital structures, of your high risk business.