We’ve spent the bulk of this chapter focusing on outside forces, conditions, or activities that require businesses to be flexible and razor-sharp in identifying associated risks. Sometimes, however, the greatest risks to continued growth and success lie within a company’s walls. Evaluate the condition of your people, processes, systems, and products for further insight into where your risks lie.

Ever since Leonardo da Vinci sketched out a helicopter and countless other visionary devices during the Italian Renaissance, the business world has been rife with stories of brilliant, innovative minds that developed great products—but never figured out how they fit into available markets. Even Thomas Edison had his problems, trying 2,000 failed iterations of the light bulb before stumbling on the one that changed the world.

Understanding how a company’s products fit into the market and the company’s overall mission is both necessary strategy and good risk management. It enables a company to differentiate itself and remain relevant.

A fine example of this comes from Volant, a manufacturer of high-end steel skis that would be considered a small business in terms of volume. Volant’s skis run from $2,000 to $3,000 per pair, which is fairly expensive. In the hyper-competitive ski market, Volant would seem to be at risk of never selling a single pair of skis. However, Volant executives know that the industry includes a customer segment that appreciates the finest quality and function in the products they buy. Volant identified its greatest risk: losing sales to lower-priced fiberglass skis. The company devised a market strategy, complete with a brand book given to all buyers, that celebrated the story of 150 years of luxurious, classy products made with fine steel. Volant established a niche for itself within the broader ski marketplace and worked hard to become the premier manufacturer in that niche which, in itself, reduces risk. Consequently, the company bypassed the price-point objection, branded itself, and ameliorated what should have been its greatest risk.

You might ask the following questions about your product or product line:

The answers to these questions mainly reveal potential strategic risks, specifically commercial risks, reputation risk, and risks associated with technological obsolescence. If you are launching new products, you will also experience financial and operational risks in project management, building new business processes, and funding. Be mindful of these when setting the world afire with your new product!

The most important aspect of any organization is its workforce. Your ability to find the right people for particular positions is directly proportional to the overall efficiency—and stability—of your operations. This is true whether you own or operate a large corporation with 10,000 employees or a diner with 10 employees. It also explains why larger companies create entire departments to deal with the recruiting, interviewing, qualifying, and hiring of employees.

Workforce management is, in essence, a part of risk management. After all, a troubled or underperforming employee is a potential risk, as is an overly ambitious employee wishing to rise to the top, no matter what (or who) might stand in his or her way. By the same token, overdependence on an exemplary employee—key man risk—can weaken the organization as well. Thus, it is vital to occasionally ask questions to identify potential operational risks stemming from the relationship between the organization and its people.

When evaluating your workforce, don’t be afraid to ask the following tough questions:

The answers to these questions can expose such issues as staffing inadequacies, potential loss of key personnel, employment practices, employee errors, wrongful acts, and workplace safety. Turn these questions into priorities. It is critical to the company’s reputation, operations, and bottom line that all risks associated with employees be identified and acted upon in short order.

Top-down businesses controlled by a hierarchal CEO, president, or management team and businesses in which the employees are highly empowered and share decision-making capability face equal amounts of risk. The specific types of risk often include compliance, stakeholder, and sometimes even operational risks to business processes. The best ways to identify these risks are to review how communication flows between management and staff and how rules and regulations are governed; that is, monitored, managed, and enforced. This happens whether they are company policies or best-practice standards set by the industry.

Examine the way the organization makes decisions. Its flexibility or responsiveness to change may be a risk if the process is too hierarchal or formal. On the other hand, having too many decision-makers can lead to mixed agendas, impasses, and paralysis of the business. Organizations develop over time, and their policy-makers need to adjust accordingly, or their decisions may impact negatively on the future and create risk.

Although most managers are intuitively aware of every process and control in their businesses, it is easy to forget the finer points of individual processes, which makes it harder to assert quality control and other risk-alleviating steps. When reviewing core processes for potential risks, it is very important to evaluate the stability of each process. In addition, be sure each process includes adequate controls and documentation. Accountability can minimize risk.

Nothing ruins a good day faster than a computer crash, especially when the data hasn’t been adequately backed up. Crashes cause instant pain—and with it, potentially high costs and loss of crucial data! In this age of connectivity, identifying the risks associated with core systems and technology is just as important as making sure products and services are delivered on time. Yet, it’s the old “you know how it goes” syndrome: Things get busy, employees type away, files aren’t saved to redundant servers, daily or weekly virus checks are overlooked, or scheduled tune-ups on critical machines are skipped to save a few bucks. The next day, the systems are toast.

Learn and review the risks associated with all of the company’s systems and technology. Hand the latest software or firmware manual to the company IT expert, and make sure he or she knows the technology well enough to troubleshoot it. With that same IT expert (it could be you) present, ask these simple questions to help identify other potential risks: