Running a business involves mastering several skills, from anticipating consumer trends to attracting the right talent. Business leaders also have to adapt to rapidly changing economic conditions, such as rampant inflation, unexpected bank closures, and most recently, a once-in-a-lifetime pandemic. Although managing risk in an uncertain business environment can be viewed as a difficult challenge to overcome, savvy business leaders understand it also presents an opportunity to grow their organizations.
Managing risk in an uncertain business environment starts by identifying potential risks, creating alternative business plans, and leveraging risk management tools to mitigate each potential risk. However, several other strategies come into play to help your organization stay away from the damage caused by operating in a highly uncertain business environment like the business environment we have to face in 2023 and beyond.
What is Business Uncertainty?
Business uncertainty represents an environment in which companies cannot identify the risks they might face in the future. During a period of turmoil, businesses cannot predict performance because of the unfolding of unprecedented events that constantly evolve. Some of the most common types of unpredictable events to manage include political, economic, and technological changes.
For example, it is often difficult to predict an onslaught of data breaches, as well as the constant barrage of natural disasters like the ones currently destroying businesses along the West Coast of the United States. Political circumstances that create an uncertain business environment also include the introduction of highly onerous business regulations.
Does managing risk during uncertain times mean business leaders should simply roll with the punches delivered by an unpredictable environment? The answer is no if you follow a few tips that help you overcome even the worst types of uncertain business environments like the one created during the height of the COVID-19 pandemic.
Change Your Perceptions
The most effective way to address business uncertainty is to change the way you view it. Business leaders that define business uncertainty in a negative light can expect rapid changes to overwhelm them when responding to the rapid changes. Business leaders must reframe the significant changes in the business environment in a positive way.
You accomplish the glass is half-full mindset by understanding business uncertainty represents an opportunity to grow your business, not shut it down.
Communicate with Your Team
A volatile business environment full of hard-to-detect risks can turn assertive business leaders into reticent business leaders. The result is losing the attentive followers of your organization. During a period of high uncertainty, your team members want to follow a strong leader who acts as a source of credible information. The most powerful way to build trust when managing risk in an uncertain business environment involves providing candid assessments of what your organization faces.
Business leaders that communicate honestly build trust which enhances the confidence of team members.
Implement a Risk Management Plan
Now, we get to the nuts and bolts of managing risk in an uncertain business environment. With the participation of your team, determine which of the potential risks presents the most significant challenges to overcome. Although the COVID-19 pandemic appeared to develop without warning, savvy business leaders identified the inherent risks of operating during a pandemic long before March of 2020.
The foundation of building a risk management plan is to assign general labels to potential risks, such as labeling potential risks as low, medium, or high.
Identify the Best and Worst-Case Scenarios
As President Franklin D. Roosevelt said, “We have nothing to fear, but fear itself.” Never let fear creep into your organization when managing risk in an uncertain business environment. Decide what are the worst things that can happen to your business and then develop strategies to overcome the obstacles. On the other hand, stop jumping from one crisis to the next by identifying which risks offer the highest payoffs for your company.
Use Risk Management Tools to Increase Flexibility
An uncertain business environment full of different risks frequently requires leaders to make decisions without having all the information. Using risk management tools can close the gap between certainty and uncertainty, while also providing business leaders with the flexibility to change plans quickly as circumstances dictate.
Referring to the COVID-19 pandemic once again, business leaders that used a risk management tool to predict the impact of a pandemic received information that allowed them to change operations. For example, restaurant owners using a risk management tool discovered how to generate revenue without opening their doors for in-person dining.
The Bottom Line: Embrace Change
The ability of business leaders to embrace an uncertain business environment represents one of the most effective ways to manage risk. You have to lean on proven methods for addressing sudden changes, as well as be willing to adopt unproven methods for your business to ride out the storm called an uncertain business environment. Above all, make decisions that encompass the values established by your organization.
Additional Economic Resources
2023 Economic Outlook – Webcast Highlights
The Future of Supply Chain Management: Trends and Best Practices
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