Risk Management Strategies to Protect Your Small Business

Contrary to popular belief, in small business, ‘risk management’ isn’t an oxymoron.

When some business owners hear “risk management”, their minds go directly to insurance coverage.

While having the proper insurance is vital, there are many situations that could cause harm to your business and should all be considered when formulating your risk management solutions.

You should keep a list of potential risks that your small business faces, and a risk management meeting should be held at least annually (many experts recommend at least twice a year) to reassess.

A staff member from each area of your business should be included in the meeting. Here are some areas to consider.

Disaster Planning

You and your managers should have a plan should a disaster (such as a hurricane) strike.

These risk management strategies should include how you will get in touch after the disaster and how you will get information to employees before and after the disaster.

Theft/Fraud

While insurance will take care of the material possessions lost during a theft, you also must consider the files that could be lost should all of your computers be stolen as well as any possible repercussions to the business should you face such a loss.

Plan risk management solutions that can minimize the trauma to the business (for example, by having off-site, automatic backups of all office computers).

Be sure to discuss the types of fraud your business may be subject to, and learn about possible coverage that may be available for it by talking to your insurance agent.

Lawsuits

Review weaknesses in both client and employee relations and work to fix any deficiencies that could lead to a lawsuit.

Review personnel policies as well as policies regarding termination of employees. Have all contracts reviewed by a lawyer before they are put into use.

Financial Management

Be sure that there is sufficient oversight to prevent theft and fraud. This includes everything from the theft of office supplies to embezzlement of company funds.

Work to minimize opportunities for employees to be in a position where they could steal from the business.

Personnel

Every job should be learned by more than one person in the business. No one should be so vital to the health of the business that if they leave, the business would fall apart.

A risk management solution in this case would be to cross-train employees so that they can handle each other’s job should the need arise.

Industry Specific

Learn the particular risk management needs of your area of business and create strong risk management strategies.

For example, people in the non-profit or healthcare industry would have additional risks to consider.

Professional Assessment

Consider having assessments done by risk management experts who are familiar with your industry or field. You should also hire a lawyer to perform an annual risk management assessment of your operation.

Taking some of the steps necessary to secure proper risk management strategies may feel like a bit of overkill to some small business owners. But the time that you take today to consider the possible risks and the steps you take to prevent them could very well save your business.

When a loss occurs, it will be too late. Set up a risk management team within your small business today, so you can prepared for whatever comes your way.

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