Risk management definitely isn’t the most fun thing to think about when running your business. However, it’s essential that small business owners take steps to minimize potential spells of volatility in their world. Failure to do this can lead to disastrous results. Here are some tips for building a risk management strategy for your small business.
Have Checks and Balances to Prevent Fraud
No one expects fraud to happen to them. Business owners tend to trust their employees; otherwise, they wouldn’t have hired them in the first place. However, fraud is an unavoidable fact of life, especially in the small business world. In fact, in 2016, about 80 percent of embezzlement cases happened at a small business (less than 150 employees). One of the major reasons for this is the fact that in small businesses, people tend to have personal relationships. When you have a personal relationship with someone, you don’t expect that they’ll every steal from you. But this is sadly not reality. It’s important that you implement some form of checks and balances, to increase the likelihood of catching in-house fraud.
There is another form of fraud that is incredibly prevalent to small businesses: online fraud. It’s important for small businesses to protect their data online. It doesn’t only negatively affect your business if you experience a hack of some kind. It also damages your customers; and they will be less trusting of you if their data ends up being compromised because of your lack of care. If you have an online store, make sure your checkout is secure by getting an SSL certificate. You should also consider multi-level verification to keep intruders away from your data.
Don’t Skimp on Insurance
Small business insurance is a necessity. There are far too many things that can go wrong for you to neglect getting small business insurance for your company. You can be held liable for damages of some kind in just about every sort of business out there. While it’s no fun to have to pay for small business insurance, this is just part of a good risk management plan. Your company won’t be able to survive if you have to pay out for lawsuits that could have been avoided with insurance.
Have a Second-in-Command
Say you suddenly fall ill, and will have to be out of the office for weeks or months at a time. How will your business survive? If you don’t have a plan for someone else to assume control of the company in your absence, your business probably won’t make it. This advice doesn’t apply for one-person companies; but all other cases should have a plan in place just in case you need to step down from the helm for a while. This can be a difficult thing to plan, as most business owners can’t imagine anyone else doing their job. However, if you really love your company, you need to see the necessity of mitigating risk in this way.
Identify Potential Internal and External Risks
Not all risks to your business are going to be black and white. Sometimes, the biggest threats initially seem like positives, only to reveal their true nature after it’s far too late. It’s important that small business owners stay keen on identifying these potential threats. One of the best ways to do this is by surrounding yourself with people who aren’t just going to tell you “yes” all the time. Contrarian opinions are a key element to staying ahead of existential threats to your company. Make sure you take all views seriously—as your best employees want to see the business succeed just as much as you.
It’s impossible to predict all issues when running a small business. This is why it’s important to develop a risk management strategy. Otherwise, all your hard work can be negated in one unfortunate incident.