While you might consider your business too small to be affected by any risk, it’s wise to be prepared. Risk management might seem like an expense you can do without, but in the real sense, its benefits far outweigh the cost. For example, if you were to approach an investor or bank, they would be willing to invest if everything checks out, and you have a risk management plan that protects their investment.
The business landscape is changing rapidly, and businesses are finding it hard to compete in this environment. Small businesses can compete in these conditions by understanding the changes as well as the risks involved. Essentially, you’re protecting your business by employing risk management strategies that allows you to compete and capture larger markets. Having a risk management plan gives you an edge. Here is how you can reduce your risk:
You have insurance for your car, house, and even life, so why not your business? Anything can happen, and you want to ready when it happens. You can prepare and have plans for every possible risk that can affect your business. However, your strategies might not work, which leaves you with losses that you can’t handle.
As a small business, you need insurance to protect you against risks that could lead to financial loss. Some of the risks that you will face could lead to property damage, losses, or liability claims. If your business isn’t insured, you’ll have to cover these costs.
Seek a trusted insurer who will help you navigate the changing risk management landscape. They’ll help you choose a coverage that protects your business against most risks.
Also, ensure your key personnel, especially those that are hard to replace. These include heads of product development, key engineers, C-Suite Executives, etc. The insurance ensures that your business is compensated in case any of your key personnel dies or becomes disabled.
2. Expand Your Product Or Service Range
Investors often seek to diversify their portfolio as a way to spread the risk. If one venture fails, you have ten more that will help you recover from the loss. The same principle applies to business. Instead of offering a single service or product, you can add a few products or services. This will spread the risk in case the consumers opt for another product, or you face competition. You can’t compete with a larger competitor who can manufacture the same product at a lower cost, thus lowering their retail price.
However, by knowing the risks associated with selling a single product, you will add products, thus ensuring business continuity in case of a change that affects your business.
3. Safety Measures
Educate your employees on safety measures and ensure that they’re adhered to. Employees spend more than 1/3 of their day at work; it’s your responsibility as the owner to ensure that the workplace is safe. If an employee is injured or dies at work due to poor safety measures, you could be fined, sued, or even shut down.
Every time an employee is injured while working for you, it hurts your reputation, and it could hurt you financially if the employees decide to sue you. Risk management understands that there are safety risks associated with working for any business or organization. It also advocates for proactive safety measures that prevent work injuries.
Remember that working in a safe work environment motivates the workers to put in more effort as they feel that the company values them. Not only are you promoting a safe workplace, but you’re also improving the relationship between you, your employees, and customers. Plus, you won’t get sued since there will be no injuries.
4. Unnecessary Expenses
When you’re starting out, you might feel the need to rent a bigger space or invest in product development without market research. You might also want to borrow from banks, seek investors, or hire more workers than you need. While all this might payback in the long term, there is no guarantee that it will.
Instead of renting a bigger space, continue using your current space until your business grows. You can also share workspaces to reduce your overhead. Don’t commit all your funds into one product, instead test the market, and if the demand is high, you can increase production.
Create a contingency plan by setting aside funds that can run your business for 3-6 months. Cut down on unnecessary expenses to help you maintain operations, especially when business is slow.
Don’t be naïve and assume that every day will be as good as the previous one. For a small business, it’s easy to be comfortable since you know almost all your customers, and you’re sure they’ll be back for more. However, this prediction trap doesn’t account for the change in regulations, slow economy, disasters, or the death of a key employee. Instead of predicting how your business will be, employ risk management to help you identify and prepare for potential risks.