Learning & Insights
Managing your risk in 3 simple steps
As a small business owner, you know there are many risks to running your own business—from making a profit to a potential legal situation involving a customer or employee. Here are three simple steps to best manage these risks.
1. Identify your risks
Some risks will be specific to your business, while others are common to many small businesses. It's critical that you identify the risks that may occur with your business. Typical risks include:
- Property loss from natural disasters, fire, criminal activity or other business interruption such as weather or a power outage
- Injury or damage your business may cause another person—whether an employee or customer
- Loss of a key employee due to sickness or disability
- Security or other data breach due to hackers or other process breakdowns
- Economic or legal issues in your community or industry
The best way to identify risks is to discuss potential issues with your employees, a risk management professional, your insurance agent or another industry expert. Discuss the likelihood of each type of risk for your business and what the cost would be to recover (or if recovery is possible). This information will help you put a plan in place to protect you and your business.
2. Make a plan
After identifying potential risks, your next move is to create a risk management plan to address how you'll deal with each one. Here are a few components you should consider for your plan:
- Research, select and purchase insurance (where feasible). For example, you may want to purchase general liability insurance to cover the cost of injuries to customers or employees on your premises.
- Install a security system and provide safety training for your staff.
- Implement policies and procedures that protect the health and safety of your employees.
- Limit exposure to accidents on your premises by performing regular tasks such as shoveling and salting around your office during winter weather or keeping a fire extinguisher accessible.
- Back up all business data, including customer lists, in case of cyber security issues.
- Perform background checks on your employees.
- Regularly maintain equipment, and keep your premises clear of clutter.
Make tasks measurable, and be sure all employees are aware of your policies and procedures.
3. Regularly review and update your risk management plan
Make sure you have all your bases covered. Review your risk management plan at least every 6 to 12 months. Conduct drills to ensure your plan is actually effective and all employees know what to do. You'll also need to update your training and insurance policies as your company grows and diversifies.
Taking the time now to create and implement a risk assessment plan will give you peace of mind in the long run. Preparation is always the best way to stay safe, secure and focused on what matters most—your customers.