Minimum Risk, Maximum Value: How Holistic Risk Management can Impact Your Company’s Bottom Line

What is the value of your business today? Now, what would happen to that valuation if something happened to you? Like most small businesses, the owner, founder or CEO becomes the backbone of operations. And when you remove the owner, you likely remove value.

Now, dive deeper. What if something happened to a key employee? What if your building, your equipment or your vehicles were gone in the blink of an eye and your clients had to look elsewhere for your services? 

As an owner, your business is woven into every part of your world – your income, your family and your future retirement aspirations. 

It’s your purpose.

Your job as a business owner, as a spouse, as a parent, as an employer, is to protect the value of that business to ensure that the business will be there if something happens – a fire, a personal medical emergency, a lawsuit, an OSHA violation or any number of catastrophic events.

To best maximize your value, you must first minimize your risk. 

I’m not saying you should be thinking about selling the business today. But if a sale were forced upon your family, they should earn the full valuation of your business – not the value of your business without you in it. 

When you choose to embark on this process, you’ll uncover various risks to your business. Risks that, if left unmanaged, will drain the value of the one thing tied to nearly every part of your life. I’m not here to scare you. My aim is to educate and encourage you to look beyond products being sold to you and start thinking more holistically. 

Can you list the top five risks facing your business today, in order from most to least likely to happen? How about the biggest vulnerabilities in the next five years?

Some business owners choose to white-knuckle their way through the risks, hoping for the best and dealing with the sleepless nights that stem from the knowledge that their business could be knocked out at any moment by a variety of events. 

Others opt for the insurance-only route, believing that a secure future is only a policy away, ignoring the myriad other risks businesses face that no insurance can cover (e.g., a key employee leaves or your succession plan falls through).

What other option is there for non-Fortune 500 businesses anyway? Can a smaller business ever really be safe in the way that the “big guys” are? Don’t sleepless nights just come with the territory?

To some extent, sure. But the truth is that your business – no matter the size – can be as safe as you allow it to be. Sure, some risk is inevitable. That’s just life. But with a healthy balance of assessing, prioritizing and addressing risk, you can protect your business, your life and your future from a great deal of risk.

And it doesn’t require you to be in a constant state of high alert. In fact, as you incorporate holistic risk management into the way you run your business, you begin to view risk more as something to be embraced rather than feared. 

In many ways, risk is a gift. It warns you of the things that could go wrong before they do go wrong, and addressing it gives you the chance to step back and work on your business rather than simply in your business. 

At the end of the day, managing risk is about more than building a dome around your business to safeguard it against potential hazards. It’s an investment in maximizing and maintaining the value of your efforts.

The biggest thing you can do for the value of your business today is to decrease risk.

Take something as simple and seemingly non-revenue-related as workplace safety. If you have solid safety practices in place that actually create a safe work environment, then a few things will happen: 

1. Your insurance premiums will go down because insurance providers prefer to work with companies with a clean record and a handle on safety.
2. Employee retention will increase – turnover at unsafe companies is always higher because people don’t like risking life and limb for a paycheck.
3. Business can continue as usual, uninterrupted by frequent injuries slowing things down, which allows you to focus on other things like sales and business expansion.
4. Any future buyer of your business knows it’s inheriting a culture that isn’t a major safety risk.

You see what I mean? While safety might not be a direct revenue generator, it’s not hard to see the link between safety and efficiency and profitability.

Or look at the contracts you sign, be they with clients or contractors. When your contracts properly transfer risk away from your business, you might be surprised to find that:

1. Again, your insurance premiums will go down because insurance providers prefer to work with companies that aren’t taking on a bunch of risk.
2. Business continuity improves when you sign contracts that leverage backup manufacturers in case of something like a fire shutting down your production facility.
3. Your plans become more reliable because you wrote them down, all but eliminating the “what if” scenarios that threaten to shut down unprepared businesses.

That’s at the core of everything we do: the relationship between the impact areas of risk, and how they can contribute to your company’s value. Because we truly believe that when business owners properly minimize risk and maximize value, you’ll find that you can feel confident in three areas that leaders often struggle to balance: your business, your life and your future.

Want to see what a holistic risk management strategy could do for your company?

We’ve helped countless companies minimize risk while maximizing the value of their business. Contact us to speak with a risk management expert today.