If you’ve expressed a desire to set up a new business, then you might have found yourself on the receiving end of a dire warning. Statistically, it is said, most new businesses fail within the first five years. It’s true – and, what’s more, it’s true even when there isn’t a pandemic unfolding across the globe.

Fortunately, it’s also true that many new businesses fail to plan adequately. Thus, by doing the proper groundwork, you can begin to tilt the odds in your favour. Perhaps the most critical part of this groundwork is the identification of risk.

Start with a solid plan

A business plan is essential to your business. Fail to formulate one, and you’re almost certainly doomed to fail. A plan will help you to set your ideas down on paper, so that they might be scrutinised by would-be colleagues and investors. Not only that, but setting down you ideas will help you to understand them, and refine them. As anyone who keeps a journal will tell you, we do our best thinking by writing.

Keep your finances under control

Of course, for the most part, your business plan will be concerned with the finances of your business. Assessing monetary matters will be an ongoing process. Make time to sit back and review things at regular intervals. If you can sense problems with liquidity, then you might take short-term action to keep the wheels turning smoothly – but it’s worth also ensuring that you’ve identified the underlying problem, if there is one, and that you’re confident things will work out in the long-term.

Think about the strategic and compliant risks

Strategic risks are those involved with operation. Are you planning to merge with, or acquire, another business? That’s something which confers strategic risk. A compliance risk involves the law, and industry regulations. This latter category isn’t always easy for a layperson to assess, which is why many businesses rightly bring in experts in risk management law to help them assess the problem and recommend appropriate action.

When gathering a team, make sure they work well together

When recruiting, you need the best person in any given position. That much is obvious. Things only become complicated when you start to ponder what ‘best’ really means. The best person in any position is the person who helps to form the most effective team. And this is the logical basis for a diversity of opinion and perspective in decision-making. Everyone should feel free to express their opinion, and everyone should be charitable in their interpretation, and willing to entertain the idea that their ideas are wrong.

This, of course, is easier said than done. Fortunately, there are a few strategies you might employ to eliminate groupthink and other kinds of tribal bias. One approach, recommended by Daniel Kahneman, the Nobel-prizewinning economist, is to imagine that things have already gone completely wrong, and then identify what caused them to go wrong. This approach, called a pre-mortem, can actually radically change the way that you think.