In Module nine, we're going to be talking about critical risks, assumptions and problems that you're going to be listing as part of your business plan. Now, this is not going to be as sexy as some of the earlier stuff, we've been talking about things like marketing and product development. But these are core things that you need to consider in your business plan. So at the end of this module, you will be in a position to be able to document all the assumptions that are used in the preparation of your business plan. And obviously less these are to add them to your business plan. You need to be able to identify as many risks as possible related to your new business.

And you're going to be in a position to develop a mitigation approach for each of these risks that you've identified. So why is this important? Well, as we previously mentioned, there are going to be a number of assumptions that you will have made in the preparation of both the financial aspect and the overall content of your business plan. Many of these will most likely have been documented throughout the business plan, and it's it's really a good idea to take these notes and summarize these in the section of the business plan. Just as a reminder to both yourself and to readers of your business plan. The assumptions will support the financial plan, which will be documented in the next section.

You will also recall from the section titled The Economics of the business, we talked about examples where we sold 1000 units of a product based on a selling price of 60 pounds and a cost price of 40 pounds. These are all assumptions and these are the sorts of things that you would need to start in this in this section. So hopefully in the preparation of your business plan, you will have identified these risks and potentially any problems. Any good planning will identify any problems with a view to putting some kind of mitigation in place to to either prevent these problems or to have some corrective action If these problems were to occur, if you haven't, then you need to review your plan until you do. Because as we all know, there's no such thing as a perfect plan. And it's important to note that no endeavor is risk free.

And it would be really foolish to think that there are no risks involved in establishing and running your own business. We all know, even working for an employer and day to day basis brings risks and issues and problems. And this is going to be more amplified when running your own business. So identifying as many risks as possible really allows you to perform a number of actions relevant to the specific risk in order to either prevent this risk from occurring, or if worst case scenario the risk does occur. What are the mitigating actions that you can take to minimize the impact of this risk? So for example, you might be importing a large number of goods and you've identified the risk that the exchange rate may change and not in your favor.

So your mitigation is to buy some kind of forward cover or to pay the supplier upfront. You could also attempt to stop the risk from occurring. And this is probably your first line of defense. And secondly, for each risk identified, you need to specify a mitigating action that you can take should this risk occur. So in the previous example, you might have chosen to accept the risk and not have taken any forward cover on on the foreign exchange have paid the supplier upfront. What are you going to do now, to recover from the risk if it comes to fruition?

So, if you do end up kind of making a loss on paying the foreign currency, what are you going to do? Are you going to cover this with sales from another type of atom or you're going to borrow money to make up the shortfall? What are you going to do if this risk does happen? Or if there's risk in fact turns into an issue? And, or, in fact, why would you not choose to prevent this risk from occurring? Let's consider another example.

If for example, there was an instance where you wanted to have a supplier person goods to you, there might be a chance These goods are going to go missing in the post, or become damaged in the post or in the shipment. So what are your options for dealing with this, there are in fact a number of ways that you can choose to manage risks and deal with these. And these are as follows. You can avoid the risk all together. And this means that you would typically need to change something in your approach. And you could choose not to purchase the goods or you could choose to collect them yourself, or get them from another supplier or any other number of actions, the first would probably not meet your objectives and the second might not be feasible.

So let's look at another few options that you can do to handle this type of risk, you could reduce the risk, and this could mean practically reducing the possibility of the risk occurring or reducing the impact if it were to occur. So to reduce the risk of damage, you might request additional packaging or you might reduce the risk of the products game missing by requesting the supplier to split the shipment into four instance. The next you can look at some kind of fallback action. This is where you effectively take no proactive action, but you plan on wonderful, sorry, one or more fallback actions should the products go missing or become damaged, for example, and you might have chosen on an alternate supplier and have them really, or you might have chosen some kind of substitute products that you could sell to your product to your customers, should your your products become damaged or go missing in the post?

A fourth option is to transfer the risk. Well, what does this mean? Well, simply This is an option that you take on many day to day risks such as damage to your home and car, you pay a third party, in this case an insurance company to take on that risk on your behalf. So if your car is involved in an accident or damaged in some other way, the insurance company pays for your car to be repaired or replaced. And in this example, you would simply ensure the posted goods, of course is a cost to this and that comes in the form of a monthly or annual insurance premium. Pay.

Next, you could share the risk. This might be an agreement with the supplier to split the cost of any damaged or missing goods, or to use the insurance example again, it's like a policy an insurance policy with an excess should your ship products get damaged, go missing or become damaged, you are liable for the purse first portion of the costs, and the insurance company then picks up a larger portion. The benefit is that your insurance premium is typically lower, but you can incur a cost should should eventually eventuality occur with this risk comes to fruition and your goods go missing or they damaged. And finally you can accept the risk and this is a conscious decision that you make. And this conscious decision is to do nothing at all. So you either doing nothing to prevent the risk or you're doing nothing to prevent or minimize the impact of the of the risk.

You'll deal with the consequences later. If the risk does occur, For example, the cost of insuring your posted goods is probably higher or might be higher than the value of the goods, you're not going to go ahead and ensure that goods, you're either going to take the risk that they go missing or get damaged. It should be noted, though, that this option is not always an option, for example, when is the legal requirements to hold some kind of insurance. So from the above, it should be clear that there are a number of ways that risks can be managed. And although there's no definitive right or wrong approach, you either need to make sure that the approach you choose is the one that's right for your level of, or your appetite for risk. The level of of kind of impact you can absorb, absorb financially, and even the top of risk itself.

So as we said, for instance, in the previous example, if there's a legal requirement to fulfill, there are certain things that you need to do and certain of the mitigating options that that won't be an option and is the risk management template included in as part of this training course. And this is going to help you in Competing the section of the business plan. And it's something that you can use beyond the business plan in the day to day running of your business. In summary, then what have we learned during this module? Well, we've learned that we are now in a position to document all of the assumptions that we used in the preparation of the business plan. We've been able to identify as many risks as possible that are associated with these assumptions.

And at a minimum, each assumption should have one risk. And we've been able to develop a mitigation approach for each of these risks that we've identified. Good luck with the section and look forward to seeing you in the next module.