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Risk management: The top 12 risks every business owner should know

Knowing the most common hurdles facing your business can inform your risk management strategy and improve your company’s chances of success.
Norwegian Bokmål

Top risks according to Nordea’s Startup & Growth experts

  1. Running out of cash
  2. Poor investor match
  3. Funding round and shareholder agreement risks
  4. Poor product-market fit
  5. Missing the boat
  6. Having the wrong team
  7. Losing a grip on financial management
  8. Currency risk
  9. Interest rate risk
  10.  Customer and counterparty risk
  11.  ESG risks
  12.  Cybersecurity risks

Risk taking is virtually synonymous with being an entrepreneur, yet business owners can avoid some of the most common pitfalls by having a clear risk management strategy from the start. While some risks will be very unique to your business, others are more universal and thus foreseeable.

We interviewed some of the experts on Nordea’s Startup & Growth team, which specialises in serving both startups and high-growth companies, to find out what the top risks are and how business owners can guard against them. Here are the 12 risks that came out on top:

1. Running out of cash

Do you have enough cash to reach the milestones necessary to attract new investors? That is the critical question, according to Håvard Lindtvedt, who heads the Norwegian arm of Nordea’s Startup & Growth unit.

“It’s important to have a good strategy for your capital journey to be able to reach the milestones that make you attractive to investors in the different growth stages of your company. Understanding investors’ criteria for investing is crucial to succeed,” he says.

One of the main competencies and contributions of Nordea’s Startup & Growth team is helping businesses structure their capital strategy to ensure that they are attractive to investors at each stage of their lifecycle. Part of that means taking advantage of diverse funding channels and opportunities, including bank financing as well as government funding programs, such as Innovation Norway, the Danish Growth Fund, Almi in Sweden and Finnvera in Finland.

Businesses should have a capital runway of around 18 to 24 months, says Lindtvedt. Less than that, and they risk running into trouble when external shocks, such as the coronavirus, hit.

For more on the capital runway, read How long before I run out of cash?

2. Poor investor match

As part of your risk management strategy, yous should choose your investors wisely. Problems can arise if expectations are not aligned, for example if the investor wants to focus on sales to increase income while the founder wants to first invest time in developing the company’s product or technology.

Don’t forget to check the backgrounds of potential investors, as a problematic credit history, for example, could interfere with obtaining bank financing down the line. And it’s also important to consider whether the potential investor has the ability and willingness to support with more cash in a stress scenario, according to Axel Bruzelius, head of Startup & Growth Sweden.

“Companies with investors that have the ability to provide more capital often succeed. Those with investors on board who are not willing or able to support with more money often run into problems,” he says.

An investor can also boost a company’s chances of success by contributing their competencies in a given field, providing access to their professional network and raising the company’s visibility.

“Too many companies take the money right away when they should really use more time to define who are the right investors for them. The investors’ contribution to a company can be very significant, and that’s important to define,” says Bruzelius.

When the ongoing pandemic has closed down all live events, Nordea Startup and Growth opens up the opportunity of virtual matchmaking. Nordea Investor Speed Dating brings together high-growth startups and scaleups and local and global investors – safely online. If you are a startup or scaleup looking for the right investor for your brilliant business idea, read more about this matchmaking event and send in your application.

3. Funding round and shareholder agreement risks

Don’t underestimate the importance of having a solid shareholder agreement, which lays out the rights and obligations of the shareholders regarding their interests and roles in the business. Such a document can be invaluable when it comes to setting expectations and preparing for issues before they surface. It’s also crucial for founders to understand the terms they are agreeing to.

Anni Ylismäki, who works on Nordea’s Startup & Growth team in Finland, recommends that business owners engage with lawyers when drafting such an agreement.

“Problems can arise when doing a funding round or when selling the company if the terms are not nailed down properly in the agreement,” she adds.

4. Poor product-market fit

Are you sure the market will buy your product? Without a market, there are no sales, which is why achieving the so-called “product-market fit” is one of the most important goals for a business in its early stages. The product-market fit refers to being in a good market with a product that can satisfy that market.

It pays to do your homework, and that means knowing the ins-and-outs of your business and the industry, mapping the competitors, doing customer research and ensuring market demand for your product. Launch a minimum viable product (MVP) and test it with your target customers to help avoid the risk of market rejection.

5. Missing the boat

In this fast-moving world, you don’t always know who your competitors are. You may have a good idea for a product you’d like to develop, but there could be someone in another country working on the exact same concept. That’s why, when you do product development, you need to move fast, according to Lindtvedt.

You can’t wait four years to introduce a product to market, he says. Rather, you need capital , developers and an aggressive go-to-market strategy to ensure a fast run through the commercialisation phase. A rapid and ambitious journey can reduce the risk of being taken over by a competitor or your product or technology becoming obsolete.

“Too many companies have too slow an ambition on this. They’ll say they want to test the market in Oslo, then sell in Norway and then maybe go on to Sweden in two years,” he says. But he notes that the big successes had international ambition from the start. They raised sufficient capital at the get-go, making internationalisation possible.

“Don’t underestimate the value of being a global first mover,” he says.

6. Having the wrong team

It is seldom the case that the founders have all the skills needed to get a business off the ground. That makes it crucial to be strategic and selective when building your team.

“Execution power” is a key word. Figure out what positions are needed to bring your products to market quickly. Focus on hiring people with the hard skills needed to execute on ideas and carry the business through the commercialisation phase. And make sure you have the ability to change the team when you reach different phases in your lifecycle.

Also, don’t underestimate the need for financial planning and accounting competencies (more on that in number 7 below).

It’s not always necessary to hire new talent. A mentor can also be a valuable way of getting advice and expertise, according to Vesa Riihimäki, head of Startup & Growth Finland. Learn more in 3 reasons why every entrepreneur needs a mentor.

7. Losing a grip on financial management

One of the biggest risks for companies entering the growth phase is getting caught off guard by the need for financial planning and reporting. This is one of the risks that Riku Tiainen, on the Startup & Growth team in Finland, often encounters in his work with high-growth companies.

A professional CFO is an expensive employee, and outside financial accounting services can carry a hefty price tag, Tiainen explains. As a result, companies in the start-up phase may not see it as a necessary expense. But with one or two big deals, growth can come suddenly.

Riku Tiainen at Nordea Startup & Growth unit helps growth companies manage their risk

“It’s extremely difficult and expensive to get caught up on financial accounting during the growth phase,” he says. When companies start to grow faster is also typically when they need to seek new financing, which makes it even more important to have the bookkeeping in good shape for potential investors in order to avoid a low valuation of the company.

8. Currency risk

If you think currency and exchange rates are only a concern for bankers, think again. Many businesses are exposed to currency risk, whether they realise it or not. And with the recent extreme volatility in global currencies, managing foreign exchange (FX) risk should be at the top of the agenda for companies with customers, suppliers or production in foreign countries.

Nordea offers a range of hedging solutions to help companies manage their FX rate risks, making business more predictable and reducing fluctuations in cash flows. Here are 5 steps you can take to manage your currency risk, and find out Why systematic FX hedging can help you sleep at night.

Many companies are also discovering the benefits of automating their FX risk management. Nordea offers numerous automated solutions, from AutoFX, a currency robot that trades according to a predefined framework, to FX APIs (application programming interfaces) that can be integrated into a company’s own systems and software so that FX risk management becomes a part of daily business, taken care of automatically. Such automated solutions provide relief from mundane daily tasks, reduce the risk of human error and free up time to focus on activities that add value to the business. Find out more about the benefits of automating FX risk management.

9. Interest rate risk

Like currency fluctuations, changes in interest rates can also affect a company’s bottom line. The more variable-rate debt your company has, the higher the risk stemming from interest rate moves, which can make budgeting and planning uncertain. Securing your finances against higher interest rates should be a part of your company’s risk management strategy, helping to improve predictability.

Nordea can help you find the optimal interest rate hedging solution to manage risks and costs. The most typical solutions for managing interest rate risk are interest rate swaps, interest rate caps and interest rate collars. These hedges can be adjusted to suit your company’s profile, taking into account the market situation. Find out more about how to manage your interest rate risk.

10. Customer and counterparty risks

Doing business brings with it the risk of customers and counterparties not fulfilling their contractual obligations. That risk only increases when that business crosses international borders as unforeseen political and economic risks can create market turmoil and further jeopardise your company’s receivables.

Companies can work to manage these risks, for example, by choosing reliable and recognised business partners. They can also manage the risk of doing business with unknown partners by using, a blockchain-based platform co-founded by Nordea. simplifies the trading process by allowing companies to find commercial counterparties, create trade proposals and purchase orders, set payment conditions and request related services from their banks, which can be agreed upon and executed in a secure space. Any company that is a customer of the Europe-wide consortium of banks supporting the platform can sign up and begin trading.

The platform allows companies to offer bank payment guarantees to their suppliers, and suppliers are also able to discount their receivables in their banks, receiving payment up front once they have fulfilled their part of the contract. It thereby addresses liquidity concerns for both the seller and the buyer. Find out more about and also how it has helped footwear company Flattered ensure that less cash is tied up in the ordering process.

11. ESG risks

Companies that manage risks and opportunities related to ESG (environmental, social and governance) factors are better equipped as they lower their risk profile and are more attractive to investors. Banks and investors are increasingly scrutinising how businesses have integrated sustainability into their strategy and operations when making financing decisions. There are also growing demands from customers, regulators and society when it comes to companies’ sustainability efforts.

While the environmental factors will vary depending on the business, they could encompass product packaging, energy efficiency, waste management and carbon emissions across the supply chain. The social component of ESG covers areas such as working conditions, labour rights and diversity-related matters, while governance includes themes such as management structures, policies, information disclosure and transparency.

By managing ESG risks, you can help your business:

  • Avoid reputational damage
  • Mitigate risks of sanctions, penalties and fines from regulators
  • Identify physical climate-related risks, such as extreme weather, not only in your own operations, but throughout the entire supply chain
  • Detect transition risks such as taxes, technological changes as well as changes in consumer preference and behaviour
  • Improve brand image and gain a competitive advantage
  • Increase your capacity to comply with existing or coming regulations
  • Attract talent and investors

For more, read about why a small business should bother with sustainability.

Small businesses in the Nordics have room for improvement when it comes to sustainability, according to a Nordea Business Insight ESG study. While many small businesses consider sustainability important, they aren’t necessarily taking concrete steps towards a more sustainable future. Learn more about how to get started.

12. Cybersecurity risks

For the first time in 2020, cyber incidents ranked as the most important risk to businesses in insurer Allianz’s annual Risk Barometer survey. With businesses embracing digitalisation and increasingly relying on data and IT systems, the risk of cyber threats has grown dramatically in recent years. From phishing, malware, ransomware and distributed denial of service (DDoS), the attacks have grown more sophisticated and can have a long-lasting impact on companies, from financial losses to reputational harm.

Businesses aren’t immune just because they are small or young. Small businesses often have less sophisticated IT security systems in place, which makes them an easier target for cybercrime. They often do business with larger companies and can be exploited by hackers as a conduit for attacking the bigger players.

One first line of defence is to adopt a security framework or information security management system (ISMS). A good ISMS covers the people, processes and technology needed for cybersecurity, allowing businesses to detect security incidents faster, and quickly implement cost-effective measures to minimise the damage.

Find out more in Is it time your business adopted an Information Security Management System?

And don’t miss the webinar with Benjamin Särkkä, Cyber Security Strategist at Nordea: Cyber weather forecast for the holiday season – How to avoid cybercrime


The risks abound when doing business, and those outlined above are just the tip of the iceberg. But good risk management can help companies avoid these known hazards and improve their chances of survival and success. Find out more about how to manage financial risk when starting or growing a business.

Read more about our Nordea Startup & Growth units in Finland, Sweden, Norway and Denmark.

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