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Business owners: Does your business plan account for these 5 risks?

On Behalf of | Jul 7, 2022 | Business Formation |

Business owners confront constant risks. These can destroy a business or inflict costly and substantial damage. Anticipation and preparation for these risks can help to better ensure owners protect their business interests. Five of the most common to account for within a business plan include the following.

Step #1: Determine what risks are present

Risk identification and management is even more important now compared to a few years ago when it comes to business formation and planning of established businesses and startups, regardless of their size.

The first step is identification and assessment risks. Risk usually depends on business activities. You can mitigate and manage strategic and external threats through acceptance, transfer, elimination, or reduction.

Once you identify these risks, trey to establish their probability of occurrence. A risk management committee, supervisor and consultant can develop plans to provide training, prevent these risks from taking place and implementing plans when they occur.

Planning for remote work may keep businesses operating if there is physical damage. Insurance can reimburse for losses.

Review these plans regularly. There should also be periodic inspections of infrastructure and equipment.

Step #2: Address any physical risks

The most common physical risk involves fires, explosions, and other hazards to buildings. Take these steps to prepare:

  • Safety response. First, assure that all employees know the location of exists and the building’s address for emergency calls to 911.
  • Safety devices. Install fire alarms, smoke detectors, and sprinkler systems were warranted.
  • Training. Provide training and educate workers on proper response if your business operations result in potential exposure to hazardous materials like toxic fumes, poisons, or dangerous waste.

Business should have plans in place to address these risks. If you are unsure of the best approach, local fire departments and agencies can assist with this planning.

Step #3: Account for potential illegal activity

Embezzlement, fraud, and theft are common offenses. Regular audits can help mitigate the potential for these criminal offenses. Other actions that can reduce the risk include double signature requirements for checks and payable verification and background checks. Even if a background check does not prevent hiring, it may help with employee assignments.

Step #4: Make sure tech is secure

This requires a two-step approach. First, the workings of tech. Power outages are the most common of these risks. Generators are reliable backup for providing power for lighting and other functions. High performance back up batteries are available for computers. Surge protection devices can prevent loss of documents and equipment destruction. On-line and off-line data back up systems may protect essential documents.

The second approach has to do with the intellectual property aspect of technology. Legal tools can help protect everything from software to client lists.

Step #5: Location, location, location

The old adage about the importance of location when making real estate deals holds true when looking at business risks. There are certain risks that come simply due to location. Some we can control, some we cannot. When it comes to risks associated with the weather, those who have operations in Texas can experience everything from hurricanes and flooding to tornadoes and drought. These hazards can also grow to include fires and other natural disasters. Make sure employees know how to evacuate in the case of a disaster. It is also wise to have proper insurance coverage to help cover the expenses that can come with these types of disasters.