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Banks are exposed to interest rate risks but many have in place strategies to mitigate those uncertainties.
Identification and discussion of business risks and challenges, and having strategies in place to deal with them strengthens the plan, enhances management’s credibility and increases the confidence potential investors will have in the business plan and its financial projections.
Being upfront and discussing potential business risks, rather than glossing over them, builds confidence in the company’s management.
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.
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.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.Although all companies face uncertainties associated with the general economic environment, some enterprises are less business cycle sensitive than others.The economic cycle risk of a food company, for example, may be less of a concern than is the case of a construction company.In the marketing plan, the company’s action plans for overcoming the competition are outlined.Some types of businesses are more subject to litigation risks than others.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.In the case of companies that offer proprietary products, there are uncertainties associated with ownership of intellectual property.It is important to have trademarked brand name and patent protection to prevent replication of company products or services, which could have an adverse effect on the company and affect the outcome of intellectual property rights disputes.