Starting and owning a business means that you accept a certain amount of risk. You’re betting that the local community or, with some businesses, the Internet will generate enough customers to support you. You’re betting that the economy won’t tank and kill your industry. You’re betting that regulatory changes won’t make your business too expensive to run. While you can’t do much about those risks, there are other risks you should actively minimize to keep your business safe.
Be Forward Looking
As Steve Culp notes, risk management often focuses on fighting the last threat. It’s easy to understand why. You have a clear target to aim at with your risk management practices. Of course, it’s the threat you don’t see coming that cripples your business. Like spotting a growing opportunity, spotting a new risk means looking beyond the confines of your business. Peter Schwartz, author of “The Art of the Long View,” recommends studying up on areas that intersect with your business. Are you online? Then you should be keeping up on IT trends and threats. Do you manufacture goods? Then you need to stay up to speed on scientific and technological innovations that can threaten your business.
Structure for the Future
You started a business and built it from the ground up into a company that employs dozens or even hundreds of people. Now ask yourself this. If you were stuck in the hospital for two months, what would happen in your business? If you answered, “My management team is top shelf and could handle the business,” you’re in good shape. If you even suspect that things would fall apart, you’ve got a problem. Businesses that rely too heavily on the owner often flounder in that person’s absence. As growth requires you to bring on more employees, begin setting the business up for success without you. Delegate responsibilities. Install chains of command and respect them. In essence, make it feasible for you to be the “big picture” person, rather than the daily details person.
Shift Risk
You can’t avoid all risk, but you can limit your exposure by shifting risk to another party. A standard method of shifting risk is through business insurance policies, such as general or product liability policies. You can also shift risk in other ways. For example, you can shift risk to vendors by including penalties for late delivery or requiring them to pay for expedited shipping if they miss a deadline. Asking buyers with shaky credit for partial or complete payment before delivery limits your financial risk. We talked with Chartwell Compliance who added, “You can even shift risk to retail consumers through warranties that disqualify certain types of product failure or that require them to engage in binding arbitration in a place of your choosing, rather than in court.”
Computer Risk Management
As almost all businesses now maintain an online presence, not to mention internal networks or virtual private networks, computer risk management plays a crucial role in keeping your business safe. As a significant amount of computer fraud comes at the hands of employees, you need digital security measures. For example, you can employ tiered-access to sensitive files based on position and department. Accounting may need access to financial records, but they don’t need access to new product designs. You should maintain a regularly updated firewall for your network to help limit the risks of hacking and only work with cloud-based applications that run top-end cyber-security protocols. You can also avoid the threat of viruses by installing filters that limit what websites employees can visit and providing in-house email accounts for business.
Risk management, though often categorized in financial terms, applies to your entire business. It’s not enough simply to buy insurance and get better at addressing the old threats. You need to be mindful of future threats, organize your business to survive without you and address the threats created by technology.
