Five key risks in business expansion

When a leading tools manufacturer in India decided to expand into the lubricants market, they had several questions about the feasibility of the project. To make sure their decision was not a blunder, I worked with them to analyse five key risks.

1. Managerial bandwidth risk
   The company's leadership team was already managing a busy operations schedule. Expanding into a new market meant taking on more responsibilities. We discussed whether they had the time and energy to handle this while making sure their existing business didn't suffer.
2. Diversification risk
   The lubricants market was completely different from their core business. Venturing into a new industry posed the risk of failure if they couldn't adapt quickly. After looking at market trends and demand, we evaluated whether this was the right move.
3. Knowledge risk
   With very little prior experience in the lubricants market, they lacked the technical knowledge needed to succeed. I advised them to consider hiring experts or collaborating with industry professionals to fill this knowledge gap.
4. Financial risk
   Expanding meant significant investment. We worked together to assess how much financial risk was acceptable, making sure the new venture didn't affect the company's existing operations.
5. Competition risk
   The lubricants market had many strong players. We worked out the competitive landscape together, and how to set their products apart.

They did enter the market after this exercise. But there were quite a few risk-mitigation tactics at play before they did.

How do you analyse risk in your business?