Your business is filled with a variety of risk factors that are never addressed until something bad happens. Most risks can be dealt with before it happens.
Both internal and external risks are mostly in your control with preplanning and awareness.
Internal risks include:
Death of owner or key employee, and illness that may be short or long term or even indefinite. Human risk in accounting, payroll, inventory and cash. Human risk may even include morale and sabotage. Equipment and tech risk includes breakdown, obsolescence and even employee driving risk.
All of the internal risks are the easiest to manage since the owner has control and can make changes and decisions that immediately affect the risk potential. Even though insurance can cover some of the dollars lost it may not be able to help with the disruption of business. For example, not having proper cybersecurity in place that may cause massive losses and business disruption that could close a business.
External risks have many areas of great concern...
Competitors and cost pressure, loss of customers or employees and increases in fixed costs and other costs such as utilities. For example, you have a busy restaurant and power goes out and you cannot take credit cards and your food supply is ruined? Or your delivery business gets a 40% raise in gasoline costs. Or a pandemic causes all customers to quit buying.
How about external factors like weather and natural disasters? If these things are anticipated and planned for, the effects can be managed.
So How do You Begin to Manage Risk?
It should start with a solid business plan. Every major corporation has a “business planning department” where all of the risks are considered. Every firm should have a “living” business plan that considers risk and outlines handling them. Also talk to vendors to see what plans they have in place to help you in case of disaster. For example, most computer companies stock disaster systems they can ship quickly.
Talk to others in your business community to see how they plan to handle a disaster and what you can do as a group to lessen the consequences. Maybe you have a threat of unfair business practice laws being passed and can band together as an industry to fight or at least influence them.
SCORE will soon be doing some risk workshops so watch for them. In the meantime, feel free to contact any SCORE mentor to discuss your risk and how to manage it.