The best way to mitigate external business risks

Recently president Kenyatta ordered a national crackdown of public service motorcycle riders popularly known as boda boda after few of them assaulted a female motorist in Nairobi.

The President’s crackdown order to restore sanity in this socially and economically important sector is long overdue.

Boda boda riders have been a menace to motorists and other road users, accounting for most accidents and inconveniences.

However, as the President noted, not all operators are a nuisance and unruly. Nevertheless, all players were adversely affected by the actions of a few members.

This incident is an example of common business risk, that action or happenstance by others associated to you in one way or another can potentially destroy your business in one swoop.

That isolated incident by few riders has caused a ripple effect that disrupted business of thousand good operators, rendered many of them unable to work, service their loans or fend for their families countrywide.

Risks are inherent in every environment and business and cannot be eliminated but can be minimalised and mitigated by taking certain actions.

Basically, business risks fall into two broad categories.

There are external risks that are out of your control. These include, but are not limited to actions of other players in your industry, politics, epidemics, currency fluctuations and what is commonly called acts of God.

Internal risks include noncompliance, biting more than you can chew, taking customers for granted, following others blindly, not insuring your business and not thinking and planning ahead.

Generally, we have no control over external risks. However, we can mitigate them to a great extent by controlling internal risks and always playing by the rules even if majority do not and it seems normal not to do so.

For example, in the case of boda boda crackdown, police are acting according to the rules and law that everyone ought to know – traffic rules, national laws, and of course common sense.

Non-compliant players are criminalised and penalised according to the law. During the crackdown period, it is hard, costly or both to comply and return back to business quickly to most riders.

However, those who have complied will have little disruption and inconvenience as law enforcement offices weed out criminals and restore order.

Fundamentally, compliance is the best insurance you can have for your business.

If you operate in a sector where some players, whether they are your competitors or not are not complying with the law you need to be very worried. Don’t dismiss it as their business. It is a time bomb!

When something awful happens or when the law eventually catches up with them, you too will be audited and if found wanting you will face consequences.

Best business practices like saving for a rainy day, not biting more than you can chew are there to mitigate both internal and external risks.

For instance, boda boda operators who had some savings in bank or sacco will definitely find it easy to survive before things are streamlined, public confidence is restored and business comes back to normal.

Mr Kiunga, Author of ‘The Art of Entrepreneurship: Strategies to Succeed in a Competitive Market’