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The important thing is to identify which of these general business challenges could impact the business and have strategies to deal with them.Companies should have strategies to stabilize their business and continue to succeed despite unexpected changes in the economic environment.Uncertainties are especially high for companies selling internally consumed products such as food, beverages and pharmaceuticals.
The business faces dangers associated with natural disasters.
These relate to changes of the weather and their consequences, such as time lost in production and distribution and resultant economic downturns that depress sales.
For convenience, these threats can be classified into three broad categories.
These are “general business risks” that are faced by all companies, “industry-specific risks” that are faced by companies within the industry and “company-specific risks” faced by the company itself.
A professional business plan should include a discussion of business risks and challenges.
Although every possible risk will not be identified and addressed, the business plan should discuss the most important ones and indicate how management will mitigate their potential impact on business operations.Potential threats include unexpected problems that may develop in quality control, distribution, marketing and promotion and other areas.Start-ups and early stage companies must also build relationships with customers and attract customers from competitors.Even professionals who have no on-site business can be sued for alleged “errors and omissions” in their advice.The litigation risk is discussed and measures to reduce it, including safety precautions and insurance coverage, can be described to indicate that the risk is known and has been addressed.The company should include the cost of liability insurance in the financial forecasts.In the case of start-ups, there are uncertainties associated with raising start-up capital and maintaining sufficient funding.Potential equity investors and lenders expect their business plans to provide assurance that management recognizes these challenges and is prepared to deal with them.The first step in the enterprise risk analysis process is to identify the internal and external threats that may stand the way of achieving planned results.Small but established companies have already gained experience dealing with these problems, reducing this business risk.The risk analysis section should mention these dangers and uncertainties, and the business plan sections relating to each risk category should have strategies to deal with them.