Risk Factors: Why Identifying and Managing Them Is Crucial for Your Business

11 min readMar 25, 2023

If you’re a business owner or manager, you know that certain factors can have a significant impact on your bottom line. These factors include availability, reputation, risk, security, and compliance. Whether you’re running a small business or a large enterprise, understanding these factors is essential for success.

Availability:

This refers to the ability of a business to provide its products or services to its customers on a consistent basis. It includes factors like inventory management, supply chain management, and delivery capabilities.

Here are a few positive examples of how businesses have leveraged availability to their advantage:

Zappos: The online shoe retailer, Zappos, built its business around the concept of availability. The company offers free shipping and returns on all orders, as well as 24/7 customer service. This focus on availability has helped Zappos differentiate itself from competitors and build a loyal customer base.
Domino’s Pizza: Domino’s Pizza has invested heavily in its delivery capabilities to ensure that its pizzas are available to customers in a timely and convenient manner. The company has developed a sophisticated delivery tracking system that allows customers to track their orders in real-time. This focus on availability has helped Domino’s become one of the largest pizza chains in the world.
Amazon: Amazon has built its entire business around the concept of availability. The company offers a vast selection of products that are available for fast and reliable delivery. Amazon’s Prime service, which offers free two-day shipping on millions of items, has been a major driver of the company’s success.

There are several examples of businesses that have been negatively affected due to availability issues. Here are a few examples:

Apple: In 2012, Apple released its iPhone 5 with a new connector, which meant that users could no longer use their old chargers and accessories. However, there was a shortage of the new connectors, which led to delays in shipping the phones and caused frustration among customers who were unable to use their new devices.
Chipotle: In 2015, Chipotle experienced an E. coli outbreak that affected restaurants in multiple states. As a result, the company had to temporarily close some of its locations and faced a significant drop in sales. The incident raised concerns about food safety, which hurt Chipotle’s reputation and affected its availability.
Amazon: In 2013, Amazon experienced a major outage that affected its cloud computing service, Amazon Web Services (AWS). The outage lasted for several hours and affected numerous websites and online services that relied on AWS. As a result, Amazon faced criticism from customers and lost revenue due to the disruption.

Reputation:

This refers to how a business is perceived by its customers, partners, and other stakeholders. A positive reputation can help a business attract new customers, retain existing ones, and build long-term relationships.

Here are some examples of businesses that have benefited from a positive reputation:

Patagonia — Patagonia is known for its commitment to environmental sustainability and ethical business practices. This has earned the company a strong reputation for social responsibility, which has helped it attract loyal customers and build a successful business.
Amazon — Amazon has built a reputation for offering fast and reliable shipping, competitive pricing, and a wide selection of products. This has helped the company become one of the most successful online retailers in the world, with a loyal customer base and a strong brand reputation.
Toms — Toms is a shoe company that has built its brand on the concept of “one for one,” meaning that for every pair of shoes sold, the company donates a pair to someone in need. This social responsibility has helped Toms build a strong reputation for ethical business practices and has contributed to the company’s success.

A few examples of businesses that have been negatively affected by their reputation:

United Airlines — In 2017, United Airlines faced backlash after forcibly removing a passenger from an overbooked flight. The incident went viral on social media and sparked outrage among customers, leading to a decline in the airline’s reputation and stock value.
Volkswagen — In 2015, Volkswagen was found to have installed software in its diesel cars that cheated emissions tests. The scandal resulted in a significant loss of consumer trust and reputation damage for the company, as well as costly legal settlements and fines.
Wells Fargo — In 2016, Wells Fargo was fined for opening millions of unauthorized customer accounts to meet sales targets. The scandal damaged the bank’s reputation and led to the departure of its CEO, as well as a decrease in customer satisfaction and trust.

Risk:

This refers to the likelihood and potential impact of an event that could harm a business’s operations, reputation, or financial stability. It includes factors like market risk, credit risk, and operational risk.

Positive examples of businesses that have successfully managed risks:

Ford — In 2006, Ford took a big risk by mortgaging all of its assets to secure a $23.6 billion loan to restructure the company. The move was risky but ultimately paid off, as Ford was able to turn its business around and avoid bankruptcy, leading to a significant increase in stock price and market share.
Airbnb — When Airbnb first launched, there were concerns about the legality of renting out rooms and apartments to strangers. To address these risks, Airbnb implemented a comprehensive screening process for hosts and guests, as well as a host guarantee to protect against property damage. These measures helped to mitigate risk and build trust with customers, leading to the company’s success.
Procter & Gamble — Procter & Gamble is a large consumer goods company that operates in a highly competitive market. To manage risk, the company invests heavily in research and development, which has allowed it to create innovative products and stay ahead of the competition. This focus on innovation and risk management has helped Procter & Gamble maintain its position as a leading global company.

Examples of businesses that have experienced negative impacts from risk:

Enron — Enron was a large energy company that went bankrupt in 2001 after it was discovered that the company had engaged in accounting fraud to hide its debt and inflate its profits. The scandal led to the collapse of the company, as well as the conviction of several top executives.
Lehman Brothers — Lehman Brothers was a global financial services firm that declared bankruptcy in 2008 due to its exposure to subprime mortgage loans. The collapse of Lehman Brothers had a significant impact on the global financial system and contributed to the 2008 financial crisis.
BP — BP experienced a major crisis in 2010 when an explosion on one of its offshore oil rigs caused a massive oil spill in the Gulf of Mexico. The disaster caused significant environmental damage, as well as reputational damage for the company. BP faced large fines and legal settlements as a result of the incident.

Security:

This refers to the measures a business takes to protect its assets, including physical assets, data, and intellectual property. It includes factors like cybersecurity, data privacy, and physical security.

Here are three positive examples of businesses that have demonstrated exceptional security measures to protect their assets and build trust with their customers:

Apple — Apple is known for its strong focus on cybersecurity and data privacy. The company invests heavily in security measures, including encryption and two-factor authentication, to protect user data and prevent breaches. This has helped to build trust with customers and maintain Apple’s reputation as a secure and trustworthy brand.
Amazon Web Services (AWS) — AWS is a cloud computing platform that has built its reputation on security and reliability. The platform uses advanced encryption and access controls to protect user data, and has a dedicated team of security experts to monitor and manage security risks. This has helped to make AWS a trusted platform for businesses of all sizes.
Brink’s — Brink’s is a security and logistics company that provides armored transportation, cash management, and other security services. The company has a long history of security expertise and employs advanced technology and strict protocols to protect its clients’ assets. This has helped to build a strong reputation for Brink’s as a secure and reliable provider of security services.

Here are some examples of businesses that have suffered significant consequences due to security breaches and failures:

Equifax — In 2017, Equifax experienced a massive data breach that exposed the personal information of over 140 million customers. The breach was the result of a failure to patch a known vulnerability, and the company faced significant backlash and legal consequences as a result.
Target — In 2013, Target experienced a major security breach that compromised the credit and debit card information of over 40 million customers. The breach was the result of a vulnerability in the company’s payment system, and resulted in a loss of customer trust and reputation damage for Target.
Yahoo — Yahoo experienced multiple data breaches in 2013 and 2014 that compromised the personal information of billions of users. The company faced significant backlash and legal consequences as a result, and the breaches ultimately contributed to the decline of Yahoo’s business.

Compliance:

This refers to a business’s adherence to laws, regulations, and industry standards. It includes factors like regulatory compliance, environmental compliance, and labor compliance.

Three examples of businesses that have benefited from strong compliance programs:

Microsoft — Microsoft is a global leader in technology, and the company places a strong emphasis on compliance and ethical business practices. Microsoft’s compliance program includes strict adherence to laws and regulations related to data privacy, security, and anti-corruption measures. The company’s commitment to compliance has helped to build a strong reputation as a trustworthy and responsible brand, and has earned the company the trust of customers, investors, and partners around the world.
Johnson & Johnson — Johnson & Johnson is a healthcare company that has a strong commitment to ethical and compliant business practices. The company’s compliance program includes strict adherence to regulations related to product safety and quality, as well as anti-corruption measures. This commitment to compliance has helped to build a strong reputation for Johnson & Johnson as a responsible and trustworthy healthcare provider, and has earned the company the trust of patients, healthcare providers, and regulatory agencies around the world.
Toyota — Toyota is a global leader in the automotive industry, and the company has implemented a strong compliance program to ensure that it adheres to environmental, safety, and labor regulations. Toyota’s commitment to compliance has helped the company to avoid costly fines and legal consequences, and has helped to build a strong reputation for the company as a responsible and environmentally conscious brand. This has also helped to attract customers who value ethical and compliant business practices.

Here are three examples of businesses that have suffered as a result of compliance failures:

Wells Fargo — Wells Fargo, one of the largest banks in the United States, suffered significant reputational and financial damage as a result of a compliance failure in 2016. The bank was found to have opened millions of unauthorized accounts for customers, and to have engaged in other unethical and non-compliant practices. This led to a significant loss of customer trust and a series of legal and financial consequences for the bank, including fines, lawsuits, and a decline in its stock price.
Volkswagen — In 2015, Volkswagen was found to have installed “defeat devices” in millions of its diesel vehicles in order to cheat on emissions tests. This non-compliant and unethical practice resulted in a massive scandal that cost the company billions of dollars in fines, settlements, and buybacks, as well as significant damage to its reputation and loss of customer trust.
Enron — Enron, a former energy company that collapsed in 2001, was found to have engaged in a series of fraudulent and non-compliant practices, including falsifying financial statements, hiding debt, and manipulating energy markets. This led to a significant loss of investor confidence, a decline in the company’s stock price, and ultimately, its bankruptcy. The Enron scandal is widely regarded as one of the largest and most egregious examples of corporate non-compliance in history.

When a business succeeds, it can create value for shareholders and build customer loyalty, leading to long-term growth and success. The importance of monitoring and managing risks related to availability, reputation, risk, security, and compliance cannot be overstated. Whether through regular audits, employee training, or software automation, businesses must be diligent in their efforts to maintain compliance, protect their reputation, and manage risks.

Fortunately, software automation can be an effective tool to help businesses track and manage these risks, and to take proactive measures to mitigate them. By leveraging data analytics and machine learning, businesses can identify potential risks and take corrective action before they result in significant harm.

It is crucial to regularly monitor and manage these risks related to availability, reputation, risk, security, and compliance. When a business suffers negative impacts, it is not only the stakeholders who feel the impact. The consequences can extend to the end consumers and even to the broader economy, as we have seen in examples of compliance failures, reputational damage, and security breaches.

In conclusion, businesses that prioritize risk management and employ software automation to monitor and manage potential risks are better positioned for long-term growth and success. Doing so not only benefits stakeholders, but also helps to build trust and loyalty among customers, and contributes to the health and vitality of the broader economy.

Here are some software solutions that can help businesses monitor and manage risks related to availability, reputation, risk, security, and compliance:

GRC (Governance, Risk, and Compliance) software: These solutions help businesses identify and manage risks related to compliance and security, by automating compliance processes, monitoring regulatory changes, and conducting risk assessments.
Security Information and Event Management (SIEM) software: These solutions provide real-time monitoring of security events and alerts, allowing businesses to respond quickly to security threats and breaches.
Reputation management software: These solutions help businesses monitor their online reputation, by tracking mentions of their brand on social media, review sites, and other platforms, and providing tools to respond to negative reviews and comments.
Disaster Recovery software: These solutions help businesses prepare for and recover from disasters, by automating backup and recovery processes, and providing tools to test disaster recovery plans.
Cybersecurity training software: These solutions provide cybersecurity training and awareness to employees, helping them to identify and avoid common cyber threats and attacks.
Vulnerability management software: These solutions help businesses identify and manage vulnerabilities in their networks, systems, and applications, by conducting vulnerability assessments and providing tools to prioritize and remediate vulnerabilities.
IT Service Management (ITSM) software: These solutions provide a framework for managing IT services, including incident management, change management, and problem management, helping businesses to ensure availability and minimize downtime.

I hope that our discussion of the importance of managing risks related to availability, reputation, risk, security, and compliance has been helpful to you. As we have seen, managing these risks is crucial for the success of any business, and failure to do so can have serious consequences for stakeholders, customers, and the broader economy.

I want to thank you for taking the time to read and consider these issues. I believe that by being proactive in identifying and managing risks, your business can be well positioned for success in the future. It is important to regularly monitor these risks and take action to mitigate them using software automation solutions, as we have highlighted in our discussion.

I wish you all the best in your future endeavors and hope that your business will thrive in the years to come.