Thursday, 10 March 2011

Diary of a Start-up: Analysing Risk


Boy, what a boring sounding title for a blog! Nonetheless, I'm reminded today by a quote uttered by a fellow start-up goer, Raj Dey, who said that 'people call entrepreneurs risk takers when in fact, it's the exact opposite of what we are trying to do. We are trying like hell to alleviate as much risk as possible'.

I had a fantastic lunch with the fantastic Tom at SSD Law today. His time is again, massively appreciated and that such an intelligent person from such a prestigious firm is willing to spend time with us on this project is a massive boost of confidence. Our conversation was insightful and related to two central tenets to this business, and indeed, business in general:

Where are the risks?

Tom had identified two risks: regulatory and operational. In essence, one is controllable, one is beyond control. As such, one can only take a view that we can do all we can to control the controllable risk and do as much as we can to avoid regulatory risk. Put simply:

Regulatory risk: if the FSA change their money laundering rules then there's not much we can do except play ball. If they change the rules on the compensation scheme we will have to innovate and find a solution but it's well beyond our field of influence.

Operational risk: making sure that our customers' data and information is totally secure and protected is completely controllable, however. This is a critical issue and will be a determining factor in people using our site - the simple question - is my money safe is an answer we can respond to with a resounding 'yes'!

It made me consider the need to possibly seek out angel investment for the business as opposed to 'bootstrap' our way towards launch. That's certainly another blog for another day though.

Key message = identify, realise and mitigate every bit of risk you can in a business. Do that and you're half way there.

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