Are you going into a business in Nigeria and you have not considered/analyzed the risks involved? are you scared of going into a business in Nigeria because of the risk involved? then this article points at you, there are certain risks that you have to consider when undergoing a business (existing or new), this will enable you to be strategic and create policies that will make your firm stand at a secure position. you should consider the following risks;
Strategic risk:strategic risks affects the earnings of a firm, when going into a business, strategic risk is of utmost importance to analyse, it is also essential that strategic analysis are made in order to ascertain the success of your business, you will have to make use of the five forces of porter and also the SWOT tools to analyse your strategic risk (remember swot?;strength, weaknesses,opportunities and threats), you as the owner or operating officer of your company is responsible for the strategic and management decision making of the firm, before you can undergo any project, you have to ensure that there is an efficient operation of the service or process, you have to make research on the processes that will be undergone during the operation of your business, and know this at the back of your mind, if you make the wrong investment decision, you most likely increase your strategic risk.
Operational risk: the capital you have involved in the business as well as your earnings must be well analysed and examined as this poses a risk to your operation, operational risk can occur due to error, fraud, and also your inability to meet up with expectation from your customers (believe me, it could really be demotivating). a good examination of your operational risk can prevent you from developing faults, the need to have a stable availability of product/services to create customer satisfaction (even up to customer delight) has brought about operational risk assessment. when initiating a new product to the market, operational risk assessment becomes difficult, largely because of your inexperience in that particular market you have chosen, or you lack logistic.
Compliance risk: when executing a business plan in Nigeria, you have to ensure that your business is in compliance with the rules and regulation governing the market, Nigeria as a country, has lots of policies on investors (either domestic or foreign) ranging from employment policies to taxes, e.t.c., these policies are to to guide the functioning of businesses, you must ensure that your business is in line with ethical standards. compliance risk is of utmost importance as it could destroy the image and reputation of your company, it could even cost your company (e.g.penalty fine) which amounts to unnecessary additional loss.
Reputation risk: you must realize that your image is also a resource to your company, if you have a good image, prospective customers will perceive your product (especially new product) positively, it is of essence to have a high reputation, OK let me put it this way; reputation is an intangible asset which can produce tangible gains (if well utilized), it is quite essential you evaluate your reputation to ascertain where you are on the customers mind.
Credit risk: this risks occurs when your customer defaults on agreement or financial obligation, it basically is about having bad debts which can ruin your company, it is expected that your company derive policies that will enable them minimize the risk from bad debt, if you are just starting up your business, it is advisable you DON’T GIVE CREDIT. and if you must, then examine the customer’s financial character towards financial obligation, inflation as well.
Interest rate risk: the difference in the interest rates of banks also poses a risk to your business, if the interest rate is high, then you will having more problems when paying back, you should know the different interest rate of banks so that should in case you fall short of finance, you will know the bank you can easily run up to and borrow money at a cheaper rate.
These risk above must be adequately analysed in order to have a successful business set-up in Nigeria, after careful analysis of these risks, you can be assure that you are threading a viable business path.