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Pages:
4 pages/≈1100 words
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5 Sources
Level:
APA
Subject:
Business & Marketing
Type:
Research Paper
Language:
English (U.S.)
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MS Word
Date:
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Topic:

Contingency Plans that an Entrepreneur can use to Minimize Business Risks (Research Paper Sample)

Instructions:

contingency plans entrepreneur uses to minimize business risk

discuss contingency plans that an entrepreneur can use to minimize business risks

source..
Content:

DISCUSS CONTIGENCY PLANS THAT AN ENTREPRENEUR CAN USE TO MINIMIZE BUSINESS RISKS
Businesses of all sizes face risks regarding development of products, manufacturing them, selling them, earning a profit on these operations and managing growth. Entrepreneurs face typical business risks but can reduce these risks and their personal liability through focusing on specific risk-reduction measures. An entrepreneur can apply the following techniques to the business.
By selecting a business structure that limits personal liability. If the entrepreneur is a sole proprietor, she faces additional personal liability risks and financial risks from guaranteeing business loans. Therefore, it is advisable to change business structure from a sole proprietorship in which the entrepreneur is personally liable for business operations to a corporation or limited liability company where they have limited liability.
By transferring risk to insurance companies by insuring against major risks such as damage to your facilities, product liability, injuries to customers or suppliers and death or incapacity of company principals.
By performing a risk analysis by evaluating the consequences of risky activities, the likelihood of the consequences occurring and the benefits of the risky activities. An entrepreneur should avoid risk by not carrying out activities that have severe and likely consequences and low benefits.
By transferring the risk of activities with severe and likely consequences but high benefits to other parties. An entrepreneur should create a new, independent company to carry out these activities or assign them to suppliers or partners.
Reduce risk from product failure and warranty claims by implementing a quality assurance program. Develop a system of reporting from customer service to identify problems. Structure the quality assurance program to document production tasks and product testing. Link the problems reported by customer service to specific failures in production or testing procedures and institute corrective action.
Reduce risk of surprises in operating results by keeping accurate records and instituting effective controls. Put in place a system that limits who can authorize specific actions and how much they can spend. An entrepreneur should implement a reporting system that gives you key information about company performance. They should also evaluate the controls and reporting system by comparing actual practice and performance to the control procedures and the reported information.
To reduce financial risk, an entrepreneur must manage their accounts receivable to minimize outstanding balances and identify poor credit risks. They therefore, should implement credit and payment standards, specifying which credit scores and payment records are acceptable. Also, they need to evaluate customer payments and ask for advance payment from customers who don't meet the standards.
Another way of reducing financial risk is by keeping outstanding loans and financing needs to a minimum. Control growth at a rate that the company can finance internally. If the company can't pay off some loans, replace short-term credit with long-term, fixed-rate loans.
Create a disaster recovery plan that includes data backup and recovery strategies, as well as plans on how to set up a remote location and alert employees to what's going on. Consider investing in business interruption insurance, which helps cover your operating costs and loss of income so yo...
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