Entrepreneurial Lessons To Learn From 2020 For Having a Better 2021 Businesses should capitalize on the opportunity this year has provided, to evaluate how they fared in terms of risk management and achievement of business objectives
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The year 2020 was unprecedented wherein the global economy was upended and organizations struggled to adapt to a new normal. The fallout from the COVID-19 pandemic holds particularly valuable lessons for startups and smaller businesses, as a segment that was especially impacted by the lockdown. They should capitalize on the opportunity this year has provided, to evaluate how they fared in terms of risk management and achievement of business objectives, the challenges they had to surmount, and how these can be avoided or mitigated in the future.
Here are the top lessons we can learn from 2020, to better prepare for 2021.
Set up a risk management function
Entrepreneurs must set up a risk management function that can identify, manage and treat any exposure to a loss or risk. Designing a comprehensive risk management function requires careful consideration of factors such as risk appetite, incident reporting, claims management and risk financing. It is best to appoint a qualified risk professional for the function, and entrepreneurs should ensure they are allocating sufficient resources towards their risk mitigation strategy.
Make space for emerging risks
Once the risk management function is initiated, a detailed business continuity plan must be formulated, to ensure that the business can resume functioning with minimal disruptions when faced with a crisis. A business continuity plan normally accounts for risks such as thefts, supplier failure, credit risks, fire, earthquake and floods. However, the pandemic has demonstrated the necessity of preparing detailed business continuity and crisis management plans even for rare events such as global epidemics and emerging risks such as climate change, where the probability of occurrence may appear low but the potential impact is significant. This is particularly important for startups, many of whom are bootstrapped and may not be able to successfully weather an extended crisis like the current pandemic.
Invest in data security
The pandemic also revealed the inadequacy of attention, on the part of many organizations, towards their cybersecurity environment. While cybercrime saw a sharp spike worldwide during the pandemic, India experienced the third-highest number of attacks, when compared to other countries, with 70 per cent of companies reporting cyberattacks during the lockdown, according to a recent survey. Such an attack not only causes damaging disruptions, but also exposes the company to litigation and loss of reputation. With automation and digitalisation becoming a critical part of every organisation, and remote working becoming a bigger part of our professional future, it has become critical to invest in a comprehensive data security plan. Entrepreneurs must ensure they are investing adequately in cybersecurity and data protection, to avoid potentially larger losses on account of a cyberattack or data breach.
Keep a war chest ready
The availability of a financial safety net can be critical in withstanding a financial shock like a worldwide recession. While larger companies may have a financial contingency plan in place, it can be more difficult for cash-strapped startups. Hence, it is important to ensure the provision of easy liquidity and surplus cash, through careful allocation of resources. Instead of investing in a larger-than-necessary office space or team, the focus should be on resource optimization and cost-consciousness.
Establish an agile business plan
The worldwide lockdown was an unprecedented event that required businesses to adapt quickly to alternative business models, and demonstrated the need for an agile approach towards creating models that can be tweaked quickly according to what is working and what is not. Part of this agility depends on diversity, where one can switch seamlessly from one option/format to another. Diversity requires that businesses avoid depending on a single customer, vendor or product, which helps them find alternatives quickly if one sector is affected. The impact of such dependence can be devastating for startups and smaller businesses, so it is extremely vital for them to dilute their risk by avoiding such a situation.
Innovation is the key
In an intensely competitive world, innovation will make the critical difference when it comes to an organization's survival. Innovation is not just necessary for staying relevant, but also in creating unique solutions in the face of a problem or threat. In an increasingly complex and uncertain world, it is vital for organizations of all sizes to focus on innovating across all aspects of their business, to stay ahead of the curve and withstand future challenges.
Adversity can be a great teacher, if one can learn from it. The pandemic has given businesses a much-needed lesson in risk management and the necessity of an agile business plan. These lessons can be critical in ensuring business continuity in the face of any future crisis, and entrepreneurs would do well to pay heed to the learnings from 2020 as they strategize for 2021.