In business, as in life, risk is unavoidable. However, when you know the exposures your business faces and prepare for them, you've got a much better chance of survival than your competitors. Specific risks may vary from business to business, but there are some that all have in common.
Check out the breakdown of the most common types of business exposures you may experience.
All business, even web-based enterprises and services, all have physical assets. With them comes risk.
These can include:
- Accidental damage
The best part about physical risk is that common sense goes a long way to minimizing it. Put in place good workplace security and safety measures, fit smoke alarms and test them regularly and train your staff in proper care and maintenance of buildings and property.
Compliance with Regulation
Your business could face serious difficulties if the government and other regulatory bodies' requirements are not met. This is particularly the case when your product could potentially pose a risk to human health, as in the case of the foodservice industry. Non-compliance with regulations could mean tragic consequences for customers and your business. If you own a bar or restaurant, you'll likely have a ton of extra exposures due to alcohol. Compliance with financial legislation, immigration, and labor laws is vital for the continued success of your business. Creating a culture of compliance is crucial to avoid having to micromanage all processes.
Your human resources can be both your greatest asset and liability. Some employees do not comply with company procedures. Others follow unsafe working practices, while still others may have personal problems such as substance abuse that impacts their work performance. The key to minimizing these risks is thorough background checks, rigorous interviews and probation and disciplinary procedures that are legally secure and meticulously followed. Workers compensation is often state mandated as soon as you have your first employee. With any new employee comes an array of business risks beyond physical injury. More common than not, fraud and unethical business practices will occur with overworked employees.
One of the most obvious, yet most deadly risks to business is the improper management of financial risk. Lack of access to credit, invoices going unpaid by customers and mounting costs of supplies can all constitute financial risks that have to be realistically managed. Depending on the business, you may also be exposed to risk from changes in government policy and external factors such as fluctuating currency exchange rates. Robust financial planning is the key to reducing your exposure to financial risk.
In a world where breaches of cybersecurity are regular fodder for news outlets, it's no wonder that even small businesses are concerned about managing their security risk. Clients are more eager than ever to understand how their data is being used and protected. Any slip-up in this area could lead to litigation and at least, the loss of your business's good name. Ensure that your systems and procedures are up to date with the latest data protection legislation and that you assure your customers that their data security is your priority.
The Bottom Line: Facing Risk in Business
Risk in business may never go away, but managing it and coming out successful is part of the thrill. It is always best faced head-on, or else it can come back to bite you one day. Keep facing risk with your eyes open, put safeguards in place and you'll be able to weather whatever storms your industry faces along the way.
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