If you’re a young entrepreneur, you already know that running a business is risky. It’s the nature of the game. Honestly, that’s part of the thrill. But sometimes when you’re young, ambitious and enterprising, you might also think that you’re invincible. You might think, “Of course, running a business is risky, but the worst will never happen to me! I know what I’m doing!”. And while being confident is good, necessary even, it’s even better to be prepared. Especially financially. Financial risk management, or rather, financial risk management can be scary to think about, but it is absolutely essential that you do. At least if you want to be successful.

So, that’s what we’re doing today folks! Because it’s Roomi’s job to take care of all its readers, especially the ambitious ones. So, to help you out in your business venture and be successful, we’ve made a list of strategies you can use to get better at financial risk management. (PS. don’t forget to thank us when you’re on the cover of Forbes!)

See also: 7 Motivational Movies All Aspiring Entrepreneurs & Young Professionals Must Watch

What is financial management and why is it important for you?

Financial management is the backbone of every business. You cannot run a business, at least not a successful one, if you don’t learn how to manage finances well. That’s how companies go bankrupt and are forced to dissolve. Of course, that’s a risk you’re taking every time you think of running a business. However, there are steps you can take to mitigate financial trouble and avoid that very outcome. Which is where financial risk management comes into play. We know, all these words are enough to induce anxiety, but don’t worry!

Here’s some tangible things you can do to get started on financial risk management-

• Identify any and all of your credit risks as soon as you can. This way you’re one step ahead of any potential disasters and can sidestep easily.
• Avoid loans and unknown financiers as much as you can, this will really help you in the long run.
• Make sure you pay off your outstanding debts and balances in a timely manner.
• Make sure you have reliable payment records in place.

See, that’s not so hard, is it?

The golden rule of financial risk management: Have a Plan B

We know this sounds like a cop-out, but trust us, it’s anything but! Having a backup plan is the sign of an entrepreneur who knows what they’re doing. Think about it, would you want to work for someone whose ambition has given them tunnel vision or do you want a pragmatic leader who’s thought of every possible outcome and prepared for the worst? Yeah, that’s what we thought.

A plan B truly saves your business when things start going south. And trust us, things will go south at some point, that’s just how it is. But it’s all about how you recuperate from those failures that will define your career. So, get thinking about your plan B!

Related: Why The Expat Experience Makes For Good Entrepreneurs

It’s all about the work, work, work, work, work!

So, now that you’re an entrepreneur, you really should get comfy with doing market research and cuz that’s your life now! Of course, when your business grows, you can get more and more people on-board to help you out here. But till then, this is your job.

Doing your market research is such an important part of the job, we can’t possibly stress this enough. How much impact your business has is directly related to how detailed your market research was. After all, a shocking percentage of businesses fail because there just wasn’t any demand for their product in the market. This market research will also help you come up with a solid and sustainable business plan. This, of course, directly helps with financial risk management and helps grow the business in the long run.

Learn how to weigh the odds

By now you can already gauge how much of being a young entrepreneur is just assessing risks. Risk assessment is of course not an exact science and no one can ever precisely predict the outcome of a business decision. However, you can certainly take calculated risks while minimizing losses. When you’re starting out it can be hard to know instinctively which risks are important and which ones can be pushed aside for a while. This is where a simple pen and paper will help. Write down all the possible risks and their outcomes.

Once you have all the information, it’s easy to assess which ones are important and have to be dealt with immediately and which ones can be left in the back burner for a while. That’s how you come up with a proper strategy to be fully prepared. And that’s essentially what financial risk management is all about. Having a good strategy and exit plan to deal with any financial fallout in the future.

There you have it, now you know the basics of risk management. So, go forth and prosper!

D’you know what else Roomi does outside of helping its readers manage financial risk as young entrepreneurs? With our ever-increasing lists of rooms and roommates across the world, we help you find your perfect match! Download the app here and hop on the easiest ride home, ever!