Crossing the street. Seeing a new dentist. Opening a business. Every day is full of risks, and those with the most fulfilling lives don’t shy away from them. When it comes to taking a chance on your business idea, finding new ways to serve customers, and navigating the changing risk landscape in your industry, Nesbit Agencies is here to help.
By understanding key risks, preparing for the unexpected, and securing a proper business insurance policy that fits your needs, you can take your risk management strategy from reactive to proactive. Together, we’ll anticipate risks before they become problems, protecting your people, property, and profits.
Risk Management In Action
No matter the industry, your business will come with its own set of risks, goals, and challenges. Because of the complexities of business-related risks, proper risk management requires a multi-pronged approach. First, business owners must determine and understand potential risks, prioritize risks based on severity and likelihood, and develop a mitigation plan that addresses each risk.
Understanding Your Risks
Depending on your business size, industry of operation, location, and many other factors, your organization’s risk profile will be different from other businesses. Here are a few things to consider when it comes to gaining a holistic understanding of key risks:
· What is the product or service you’re offering to customers? Could it be potentially harmful (like medical services) or cause injury (e.g., thrill rides)?
· Are there local natural disaster risks that could disrupt business or damage inventory?
· What does your cyber exposure look like? Are you protected against fraud, hacking, and other internet scams?
· How likely are your employees to get injured on the job? Even office staff in desk-centric positions can become injured on-site.
Assessing The Impact Of Risks
It’s clear from the non-exhaustive list above that the risks businesses face are abundant and varied. Preparing for each and every possible risk would be nearly impossible. Instead of trying to solve for every issue at once, take time to categorize risks based on how often your business is exposed to them and how detrimental they can be. Consider forming a tracking system like this:
· Red Risks: Risks that could result in more than $10,000 worth of costs, disrupt business operations, and/or result in bodily harm.
· Yellow Risks: Use this classification when risks are severe but less likely to happen often. For instance, the risk of someone falling at work is important to consider, but in an office setting, it is unlikely.
· Green Risks: If risks are unlikely to happen and unlikely to cause severe damage or liability, they can be placed in the “green” category.
Your prioritization system doesn’t have to utilize the exact framework that we’ve shared above, but establishing a method that allows company leadership to prioritize and manage risks in a way that makes sense will always be a worthwhile endeavor.
Developing A Risk Management Strategy
Once risks have been identified and categorized within your company framework, create clear steps to establish all high-priority risks. Some risks may require additional training while others call for operational changes, technology upgrades, and additional insurance coverage. If you can’t fully prevent a risk from happening, the next best thing is to secure an insurance policy that provides support when it does happen.
Real-World Risk Factors In Business
Let’s examine a few risks that impact most businesses. We’ll let you know how we’d categorize each risk, and, of course, what we’d recommend in terms of mitigating these risks, too.
Risk 1: Cybersecurity Breach
These risks, although critical, are underestimated in many situations. Cybersecurity breaches can cause operational disruptions, hundreds of thousands of dollars in financial losses, and major brand damage.
We’d consider this a Red Risk. In order to get ahead of cyber-related risks, businesses should invest in quality security software, partner closely with an IT services firm, and establish a cybersecurity insurance policy.
Risk 2: Inventory Damage From Floods
Risks that are caused by natural disasters will vary based on the region where you operate and the weather systems that come into contact with your business. Things like floods, fires, hurricanes, and blizzards can all be catastrophic if not planned for, but the likelihood that you’ll be impacted by these risks is a bit lower than in other categories.
For the above reasons, we’d consider this to be a Yellow Risk. Be sure to have proper weather gear, storm protection on site, and flood insurance for your business. It’s also a good idea to create emergency evacuation plans and protocols so you can protect what’s even more important than inventory—your people.
Reviewing And Enhancing Your Risk Management Plan
Risk management is not a one-time task. It’s a continuous process that requires business owners to understand macro and micro considerations within their business landscape. All risks, big and small, can put businesses in challenging situations. By creating a risk management strategy, you can better address the most critical risks while keeping an eye on all of the possibilities.
As industries, technologies, and regulations change, risk factors will change, too. Regularly reviewing your risk management strategy allows you to improve mitigation strategies, be proactive about emerging risks, and ensure your business goals are met.
If you’re ready to move from a reactive risk management strategy to one that’s forward-looking, contact the Nesbit Agencies team today. We’ll help manage risks, plan for the unexpected, and provide peace of mind.
