As any experienced entrepreneur can attest, there are six types of risk facing all small businesses: financial, reputational, strategic, compliance, business interruption, and security. Each day, small business owners do their best to manage these risks and mitigate any fallout that stems from dropping their guard.
Needless to say, some businesses are more adept at risk management than others. Failure to properly manage risks in any of the areas mentioned above can have far-reaching consequences for even the most robust small business. Business owners looking to keep risks under control and develop workable management strategies can benefit from the following pointers.
Become Educated
As previously stated, small business owners face six distinct types of risk on a near-daily basis, and you’d be wise to educate yourself on all six. In order to bolster your enterprise’s risk management efforts, both you and your workforce will need to understand the many varieties of risk you’ll be contending with. If risk management isn’t exactly your strong suit, consider reaching out to experienced third party risk assessment professionals.
These individuals can bring you and your staff up to speed and provide you with an abundance of tools to combat an ever-expanding array of risks. Instead of learning as you go, taking the time to educate yourself on risk management can have far-reaching benefits and help keep your enterprise solvent for years to come.
When in Doubt, Consult an Attorney
Many small businesses make the mistake of never enlisting the aid of skilled attorneys. Unless they have an immediate need for legal representation, some business owners wouldn’t dream of consulting an attorney regarding matters pertaining to risk assessment. However, experienced lawyers tend to be top-tier risk managers. In addition to identifying and offering advice on a wide assortment of risks, a good attorney will be able to clear up any questions you may have regarding the legality of business practices, promotional efforts, and client relations.
Develop a Crisis Plan
As the adage says, “Plan for the best, but prepare for the worst.” Developing solid risk management skills can go a long toward helping your business avoid crisis situations, but it won’t make your enterprise immune to unforeseen crises. With this in mind, take care to develop a crisis plan for your business.
For example, if you’re ever faced with a sudden and severe decrease in capital, the mass exodus of staff or loss of an important client, you’ll need a workable plan in place to ensure that your business remains operational amidst this crisis. Even if such an event never comes to pass, having a good emergency plan at your disposal can provide both you and your workforce with tremendous peace of mind.
Treat Employees with Respect
Since losing key personnel is synonymous with both business interruption risks and operational risks, it’s in your best interest to treat your team members with dignity and respect. The more vital a person is to the operation of your enterprise, the more appreciation they should be shown. Furthermore, employees who consistently go above and beyond the call of duty should be promoted and rewarded accordingly. The less respect you show your staff, the more likely team members are to abandon your business on short notice, so it’s important that your workforce not be taken for granted.
Be Mindful of Client Interactions
Being respectful and obliging when dealing with clients is every bit as important as treating your staff well. Dissatisfied clients are closely associated with reputational risks, so being dismissive of their needs, queries or concerns does not bode well for your business. Additionally, when you or your team members interact with members of the general public on behalf of your enterprise, reputational risks shouldn’t be far from your thoughts. For instance, when engaging with followers on social media, make a point of being as courteous as possible, and avoid being baited into bad-faith arguments by people who just want to make trouble.
Risk management is an unavoidable part of small business ownership. Nearly every aspect of owning a business involves some level of risk, and it behooves responsible proprietors to hone and polish their risk management abilities. In the absence of comprehensive risk management, a business can find itself in financial trouble, dealing with damage to its reputation or even on the wrong side of the law. Any business owner looking for effective ways to manage and control risks should utilize the measures discussed above.
