The biggest risk is not taking any risk. Everything has a level of risk, from learning to ride a bicycle to try a new hairstyle. When you own a small business, you know you’re accepting risks, some you’re aware of, and some will be surprises.
1. Transfer the risk: Buying insurance allows you to transfer your risk to insurance companies. Insuring yourself against the risk of fire is an obvious example the insurer carries the financial risk if a fire destroys your warehouse. Other forms of insurance might include: Life Insurance, Disability Insurance, Professional Insurance, Completed Operational Insurance.
2. Prevent the risk: The best risk insurance is prevention. Preventing the many risks from occurring in your business is best achieved by changing your business process, equipment or material to achieve a similar outcome but with less risk. In drastic circumstances, if the risk consequences are too high, you could avoid them completely by cancelling or stopping the high-risk business initiative.
3. Reduce the risk: If a risk can’t be avoided reduce its likelihood and consequence. This could include staff training, documenting procedures and policies, complying with legislation, maintaining equipment, practicing emergency procedures, keeping records safely secured and contingency planning.
4. Accept the risk: Accepting the consequences of the risk may be your only option when all other options have been exhausted. This is often accomplished by developing a contingency plan to execute should the risk event occur. This strategy works best for small risks where the impact isn’t that big, or for risks that are unlikely to happen.
There will always be risk involved with starting a business or doing something new with your business. Conducting a risk management assessment is just one way to know what those risks are. That way, you can create a plan for managing them to ensure they have as little impact on your business as possible.