“Risk” gets thrown around so much it might as well be wallpaper. Helpful definition:
Business risk is the possibility that events or decisions will prevent the company from achieving its objectives.
Not very poetic, but it works.
Useful categories:
- Strategic risk: Wrong market, wrong product, and late to a structural shift. The slow, expensive kind of failure.
- Financial risk: Liquidity crunch, over‑leverage, covenant breaches, interest‑rate exposure.
- Operational risk: Systems break, processes fail, people make mistakes, and key suppliers disappear.
- Compliance / legal risk: Fines, sanctions, lawsuits, regulatory bans.
- Reputational risk: The internet decides you’re evil and talent, customers and regulators respond accordingly.
The point is not to put everything in coloured boxes. It is to answer four questions for each serious risk:
- Likelihood: how often could this realistically happen?
- Impact: if it does, how bad is it in money/time/survival terms?
- Mitigation: What can we do to reduce the likelihood or impact?
- Residual: after all that, are we comfortable living with it?
Business risk management is not about avoiding bad things. It is about choosing your exposure on purpose instead of on autopilot.