One of the most important elements of running a business involves the identification, analysis, and prevention of – or response to – risk.
Unfortunately, this is also one of the most commonly overlooked aspects of business management and entrepreneurship, leading to a high proportion of businesses failing within five years of operation.
Naturally, a failure to anticipate and fully understand potential challenges leads to a lack of provision that will see those same problems get the better of any company that does not take risk assessments seriously.
If you wish to open your own business in the future, it’s vital that you employ proper analysis methods and take a comprehensive approach to risk mitigation in order to give yourself the best possible chance of success.
So, what does this mean, and how can it be achieved? In this article, we explore the ways business analytics can contribute to the identification and mitigation of risk, resulting in a fruitful and incident-free future life for any organization.
What is business analytics?
The field of business analytics involves the collection and analysis of data and the application of statistics to establish the most effective methods of business management. It also helps to ensure the prevention and resolution of problems involved in the running of any organization.
Often, business analytics involves the application of “big data” – that is, large and complex datasets. Many of these are freshly collected and require speedy, effective analysis.
The discipline is rich with various techniques and approaches, and potential specialists and business owners may choose to study for an advanced qualification in the subject to develop an expert-level understanding of its intricacies.
There are even remote courses for busy future entrepreneurs who require an accessible, affordable, and flexible way of getting to grips with this important specialism. For example, St. Bonaventure University offers an online business analytics masters degree that can be completed in just under two years.
What is risk mitigation?
The practice of risk mitigation involves the development of techniques and resources to prevent problems and overcome challenges.
Risk mitigation can usually be broken down into four steps: risk identification, risk assessment, risk control/response, and the reviewing or monitoring of the overall process, which comprises the three previous points, including all methods and resources utilized.
Naturally, this is a vital discipline in the world of business
As an example, if you plan to open a shop or retail business, you will need to undertake extensive research into the common pitfalls and challenges faced by others in your industry. This is the risk identification stage.
You must then work to implement tools that will track your company’s performance and help you recognize how likely it is that you will fall into these same pitfalls. These same tools should provide you with ample warning when you are at risk of doing so. This is the risk assessment stage.
Ideally, the resources you have in place will then present you with the ways and means to get your business back on track and keep it there. Alternatively, you will need to develop a plan of action yourself. This is the risk control/response stage.
Finally, you should look back over the previous steps to analyze their efficacy and determine whether there is a way to avoid the stumbling blocks with which you have just been presented in a simpler, more comprehensive manner. This is the review/monitoring stage.
Types of risk that may be mitigated through business analytics
Almost every type of risk or challenge can be reduced – or even eliminated – by way of business analytics. The most common issues that may be overcome by the application of these practices include:
- Health and safety issues that may otherwise result in injury and/or costly legal claims
- Stock wastage, damage, or loss
- Risk related to the application of unsuitable processes or resources
- Funds lost through poor time management
- Potential security breaches, fraud, and data loss or theft
- Mistakes or oversights regarding compliance and regulation
- The potential for changes in fashion or audience preference, or for the development of new technologies and more advanced competitor products and services
- Risks related to the wider world, such as the possibility of natural disasters, financial crashes, war, or pandemics
- The potential for poor performance and sub-par customer service, resulting in reputational damage
Practices in business analytics that help to mitigate risk
When it comes to the assessment and prioritization of risk factors, it is clear that the collection of both quantitative and qualitative data is extremely important. However, it is the way this data is analyzed that can mean the difference between success and failure in business.
Here, we explore some of the key practices within business analytics that can be effectively applied to achieve the most potent risk mitigation methods.
Trend identification and analysis
By recording and processing data relating to trends, a business can make informed predictions associated with the following:
- Competitor performance and their potential future activities
- The company’s own financial performance and projected growth
- The efficiency and longevity of current service delivery or manufacturing methods
- New developments in technology, technique, and audience preferences
- Business KPIs (key performance indicators)
- Customer feedback or complaints
- Hiring and staff performance
This technique allows business managers to stay “one step ahead” when it comes to future planning and predicting the outcomes of certain decisions. It may also provide those managers with the information required to implement risk mitigation strategies in advance, preventing problems long before they arise.
Comparative analysis simply involves placing two products, processes, or strategies side by side in order to perform a direct comparison. The results of this comparison enable the operative to determine which aspects of each option are likely to perform best.
This approach may be used to weigh up two different products, customer service techniques, workflow systems or, indeed, risk mitigation methods. It is a common and effective practice in the world of business analytics and makes a powerful addition to any entrepreneur’s toolkit.
Whether it is applied to two similar products or services offered by your own business and a competitor, or two different risk prevention approaches you are considering in order to achieve the same results, comparative analysis will enable you to look at the costs, rewards, and features of each simultaneously.
This type of analysis perhaps relies more on qualitative than quantitative data, though both types play their part. It is an approach that enables operatives to constructively summarize the information they have collected, whether in text, graph, or chart form.
Descriptive analysis is one of the most vital techniques when it comes to the power of data used for forecasting purposes, as it serves to inform future risk mitigation strategies by:
- Presenting a summary of the approaches that have worked in the past and why
- Analyzing the methods that have not been successful or that require further development
- Forecasting changes in the wider business, societal, and global landscapes that may affect the efficacy of a company’s risk mitigation techniques in future
The above practices will help business managers collect data that will inform them of the potential challenges associated with any future actions they may be considering.
Analyses of this kind can also present those at the helm of an organization with a range of options when it comes to risk mitigation and may even provide figures to indicate the probability of success in each eventuality. This vital information is key to the development of strong risk prevention strategies.
Additional analytics tools for risk mitigation
Business owners should also consider tech tools, software, approaches to automation, and other cutting-edge methods when considering risk assessment and mitigation.
Of course, it is important to be wary here, as there is even risk inherent in these choices; the application of too many resources or tools that function at odds with one another can lead to overcomplicated processes, convoluted staff training programs, or a greater likelihood of duplication and mistakes.
Automated reminders and alerts
To be as effective as possible, risk assessment and analysis must be undertaken regularly. To this end, the setting of regular reminders or updates prompted by certain events may prove valuable to many key members of personnel within an organization.
Business managers can also set certain controls, which an automated system tests or scans regularly, generating alerts when any notable changes occur so individuals are able to respond in a timely and appropriate manner.
Report generation software
Manual reporting has its place, but the likelihood of inaccuracy and human error is greater using this method than when using specialist automated software.
Programs of this kind allow for all key parameters to be set and tweaked as preferred to ensure that all vital data is collected and analyzed at the most effective intervals.
This means that changes and potential issues can be tracked, monitored, and acknowledged or remedied in the best possible manner every time.
Data visualization can be a very fruitful approach, proving particularly valuable to individuals and teams undertaking comparative analysis.
By rendering quantitative results in a visual medium, such as graphs, charts, and infographics, current findings and future projections can be easily analyzed and directly juxtaposed for streamlined decision-making.
Tools of this kind are not only useful for individuals seeking a more fundamental understanding of data-based findings but also make the presentation of these findings to colleagues, partners, and other groups far more straightforward and “digestible”.
Web scraping software can be highly beneficial to organizations wishing to undertake high volumes of research and data collection to analyze competitor or audience information for purposes of risk mitigation.
These automated tools collect publicly available data then extrapolate the relevant information required by the business by which they were deployed, creating crucial reports and saving many hours of company time.
“Data ingestion” services
As big data often plays a significant role in both business analytics and risk mitigation, the implementation of data ingestion tools can prove extremely useful to an organization.
Resources of this kind allow companies to access, import, organize, group, and store significant quantities of information, priming it for effective analysis.
Depending on the nature of a business, the analytic approaches employed, and the types of risk to be mitigated, operatives may decide to invest in any or all of the tools above.
Of course, with further advances taking place all the time, business owners should keep abreast of new developments in the world of data collection, analysis, and security to build the most effective, streamlined, and up-to-date approach.
Where to learn more about business analytics
Whether you are a current or future business owner, a student of business practice, or someone with an interest in risk analysis and mitigation, it is important to note that the information in this article represents only a very brief introduction to the ways business analytics can be applied to risk mitigation.
This field of study is a rich one and, as is clear from all that you have read here, there are numerous avenues to explore.
Many thousands of journal articles, studies, and think pieces have been published on the subject, and more approaches and techniques are coming to light every day.
In order to grasp the discipline of business analytics in the most effective manner possible – and in a way that sets you up to respond flexibly and constructively to future developments in the field – the best course of action is to study for a professional qualification in the subject.
Not only will this see you furnished with all of the vital information you will require to run a robust, enduring company, but it will also train you to develop flexibility and proficiency, enabling you to undertake ongoing research into new approaches in a manner that will quickly become second nature.