Every small business is subject to a certain amount of risk. But unguarded exposure to hazards ranging from liability to disability only increases the likelihood that you’ll face financial hardship, a tainted reputation, or worse, the complete destruction of everything you’ve worked for.
The best way to protect your company’s investments and assets from threat is with a sound risk management plan. Before we look at the basic elements of prioritizing, managing, and preventing risk, let’s consider a few of the perils that businesses commonly face.
Liability risks include property damage, libel, bodily injury – and everything in between. In fact, regardless of what your professional activities entail, there’s a chance that a client, employee, or your company property could be harmed in the course of pursuing them.
There’s a good reason why business, finance, and background screening play such a key role in today’s corporate environment. The Association of Certified Fraud Examiners (ACFE) attributed business costs of more than $6.3 billion to fraud-related incidents in 2016 alone, so it’s crucial that you understand just who you’re hiring or partnering with.
3. Personal Disability or Illness
If you’re involved in an accident, or become seriously ill and unable to work, what will happen to your business? Most owner-operators are the lifeblood of their companies, and it may be difficult to maintain an adequate income stream if your personal involvement declines.
4. Workplace Safety
The physical risks associated with running a business include everything from fire, to tripping hazards in the workplace. Inadequate insurance coverage, and a lack of training in emergency procedures can play havoc with your company’s bottom line.
5. Loss of Key Personnel
Good people with specialized skills and knowledge can up and disappear for many reasons – effectively leaving your business to pick up the pieces. Whether it’s short-term illness or a more permanent circumstance, losing key employees can impact both productivity and revenue.
6. Cyber Security
How safe is your data? Research suggests that not only do more than 40% of cyber attacks target small business, nearly two-thirds of small companies fail within six months of being attacked. Security aside, it’s also essential that your business address the threat of power outages and document loss.
Make Risk a Priority
Effective risk management starts with understanding which threats your organization is most likely to bump up against. Certain risks tend to cause greater dollar, time, and productivity losses, so figuring out which circumstances pose the biggest threat will help you to better allocate your risk management resources.
Manage Your Risk
The best way to manage the risks you can’t avoid is by insuring yourself against them. Specialized insurance is available for just about any commercial peril – from the loss of accounting data, to the treatment of employee alcoholism. At the very least, your business should have general liability insurance to protect its assets from abuse and the high cost of legal fees.
Prevention really is the best medicine where small business risk is concerned. Knowing what action to take in the event of a professional emergency is vital, but reducing the chances of it happening in the first place is even smarter. Doing your due diligence may include:
- Background checks on potential employees, clients, and business partners
- Maintaining and backing up on-site equipment and computers
- Cross-training personnel, and instructing them in safety, security, and company policies
Running a business will always go hand-in-hand with certain inherent risks. But knowing what these are – and how to mitigate them where possible – will keep you ahead of the game.