Small Business Saturday Blog

Protecting Your Business Against Risk

Tuesday, April 04 at 16:06Protect | Small Business

Small businesses are particularly vulnerable to unexpected events and fast changing circumstances. The number of risks a small business is exposed to are many and it is often the unexpected that causes a thriving business to suddenly fail. With about half of small businesses failing within the first five years, it is worth doing as much as possible to mitigate the risk factors in your business.

1.Get up to speed with cyber risks

Even stiffly defended large businesses are vulnerable to attacks by cybercriminals; small businesses are easy targets in comparison. Take steps to reduce your exposure to cyberattacks: use strong passwords for all systems, employ firewalls for your office network and website and always install software updates on all your equipment. It is also worth monitoring the latest security news and training your staff – the 2016 Government Security Breaches Survey suggests only 22% of small businesses have a staff member that attended cybersecurity training in the 12-month survey period.

2.Take out insurance, and review policies regularly

Many business risks are insurable. You may already have property and equipment insurance, but small businesses often skip on key man insurance for their most important employees, while public liability insurance will prevent an unlikely accident from developing into a costly lawsuit. Regularly review insurance cover – the circumstances of your business will change with time and you need to update your insurance cover to reflect this.

3.Survey the business environment

Changes in the business environment can lead to a successful business experiencing unexpected problems. By looking ahead you can identify future problems before they become a reality and planning for the possibility of adverse circumstances developing can mitigate these risks to your business. This includes potential competitors, changes in the regulatory environment and shifts in customer preferences.

4.Involve an advisor

It is difficult for a small team of employees to comprehensively survey business conditions and accurately identify risks, especially if it is a new business. To avoid any blind spots, think about getting professional risk management advice. A risk management advisor will discuss with you in detail the environment in which your business operates, and help you to identify all potential risks.

5.Diversify

Concentrating the exposure your business has to any single supplier or any single customer increases the risk of your business suffering if a supplier goes out of business, or a customer decides to move on. This is also valid for the markets your business operates in on both a product, and geographic level. Operating in multiple regions and different product markets can make it easier to ride out a contraction in demand in any given area.

Small businesses are vulnerable to risks

It is often the vast sums of money involved in the risks large businesses face that make headlines, but large businesses are also more able to absorb losses in their balance sheets. A smaller enterprise can be fatally wounded by the realisation of a single risk, even if the sum of money involved is relatively small. For this reason managers and owners of small businesses should be at least as vigilant when it comes to risk management as those in charge of large companies.

Written By Michael Watson

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