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4 Questions to Help Safeguard Your Small Business Against Current and Emerging Risks
When it comes to risk, most businesses are reactive rather than proactive. They’re constantly looking at risk in the rearview than through the windshield. These businesses are constantly blindsided by risks that could have easily been avoided with just a little bit of foresight – if they would have looked ahead rather than looked back.Today, I want to look at four questions designed to help you take a proactive approach to risk management rather than a reactive one.
Are You Working on Your Business, or Just in It?
Many business owners fall prey to the age-old trap of working in their business without ever working on their business. It makes sense. You want to produce the best product or service, so you keep a close eye on every detail of your company, especially for the first few years. But at some point, you have to remove yourself from the daily operations in order to focus on the overall health of the business. It’s difficult, but the most successful business owners make it a priority – and everyone else stagnates or dies off.
It’s kind of like a fisherman who is so focused on catching fish that he fails to notice the tiny hole in his boat. It may take a while, and he may catch a lot of fish in the meantime, but eventually that hole is going to sink the boat – and when it does, his fishing days are over.
The fisherman is aware on some level that his boat could sink, but he didn’t bother doing anything to try to safeguard his livelihood, even just periodically checking his boat for leaks.
It’s the same with business. You know the risks to your business better than anyone else, because you spend more time on it than anyone else. But just because you are subconsciously aware of things that could happen doesn’t protect you from them in any way.
The best tool is a deep, holistic approach toward risk. Ask the right questions. Face the reality of things that could shut down your business at any moment. Hackers. A pandemic. A competitor opening up shop across the street.
Don’t get me wrong – it’s impossible to prepare for every risk out there. But that doesn’t mean you shouldn’t prepare for the most likely and most damaging ones.
What Risks Are Out There?
Every business faces risks that are unique to its industry, size, supply chain, location, workforce and clientele, among other factors.
It may help to consider your company’s current risks based on categories. Some of the most common risks facing 21st-century businesses include:
Cybersecurity – Where is your business vulnerable to hackers, fraud, scams and other tech-based crime? Are your passwords secure? Are your tech providers keeping their systems locked down? Beyond illegal activities, are there systems that could majorly upset your business if they went down for an extended period of time?
The risk to your business is clear. Nearly 40% of small businesses report having lost crucial data as the result of a cyberattack, and 55% of Americans say they are less likely to continue doing business with a company that has had a breach. Small businesses are the number one target for malicious emails because they typically have less security measures in place to protect them from ransomware and phishing.
A starting point for solving this particular issue could be as simple as using a password manager. They’re cheap, they’re easy to use – and they can save you a lot of headaches in the end.
Legislation – This one is especially important if you work in an industry like construction. When OSHA adopts new workplace safety laws or the DOT enacts new transportation safety standards, your company has to be sure to maintain compliance, or you could be hit with some major fines. OSHA penalties alone can be anywhere from $16,131 per day to $161,323 per infraction.
Keeping up with the latest standards requires you to build a culture of compliance at your company that involves everyone from the newest employee to the owners. In addition, you want to be sure you have good compliance attorneys who can alert you when new, relevant legislation is passed.
AI – It’s hard to think of something that has made a bigger splash in the corporate world than AI. It’s a truly amazing tool that, when used correctly, can have a huge impact on any company’s efficiency. If it’s used incorrectly, you could be leaving yourself open to all sorts of risks.
If you use it to produce content, how are you vetting its accuracy? If you’re putting your company’s data into an AI tool, how sure are you that your private information is being protected?
New technology always carries risk, whether you adopt it or not. If you choose to use it, there’s the risk of it not working or exposing your data to insecure networks. But if you choose not to use it, there’s also an opportunity risk that you can fall behind in a hurry if you’re not keeping up.
It used to be if you were slow to market, it might take time before it had an impact. But with tech, when you fall behind, you fall behind in a hurry.
Supply Chain – No one could have prepared for all of the effects of Covid. It was too big and too fast for any business to be insulated from its impact. Still, we learned a lot about how the supply chain works in our country, and businesses that survived hopefully came away with some invaluable lessons that they are applying on an ongoing basis. But supply chain risk goes beyond global pandemics.
As I write this, there’s a lot of talk about tariffs on imported goods from countries like China, Canada and Mexico. Businesses that rely on production from these and other countries should be thinking through what impact tariffs could have on your business.
Operations – Are you considering a different scope of work, or entering different markets? Pushing into new areas of business comes with a great deal of risk, whether it’s additional legislation or innovation risk that would require your business to operate on a different level.
When you look at pushing into new areas, be sure to sit down with a risk assessment specialist who is familiar with your industry and can help you look at what you’re getting into with a clear head.
Competition – What are the chances that someone will start a business just like yours and do it cheaper, faster and/or better than you? While there’s no way to be totally ready for a competing business, I find that keeping this question in the back of your mind as a business owner can help you avoid becoming complacent.
Which Business Risks Should You Take Seriously?
Like the fisherman who ignores the hole in his boat so he can keep catching fish, ignoring the real risks your business faces can sink your entire enterprise before you even realize what’s going on.
Then again, there are also business risks that you don’t necessarily need to worry about. As a result, it’s important that you figure out how to properly prioritize the current risks your business faces.
Like I said before, every business is different, but with a couple simple questions, you can establish a clear starting point for addressing current risks:
- Which risks are most likely?
- Which risks, if actualized, would be the most damaging to your business?
Where the answers to these two questions overlap, that’s where you should start with your risk priorities.
Who Else Is Working on Your Business?
Lastly, you want to consider who you have looking at your business. If it’s just you, then you’re bound to miss something. While you may know the small business risks more intimately than anyone else, owners often underestimate the impact they could have.
Maybe you join an industry organization that can help you think through the risks your company faces. Maybe you hire a risk assessment expert who has helped other businesses like yours develop an effective risk management plan. Maybe your attorneys can help, too.
Whatever it is, you want to build up a reliable team that can help you look through the windshield, not just through the rearview.
Want Help Addressing the Current Risks Facing Your Small Business?
At Ellerbrock-Norris, we’ve helped countless small businesses figure out how to thoroughly address risk without letting it overwhelm their business goals. Contact us today to set up a time to talk to a risk management expert.
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