It’s not a secret that running a business is a risky affair especially in its infancy stages. The many risks that a business faces are both internal for example poor financial planning and external for example hiked prices of raw materials. The impact of these business risks can end up destroying a business completely if they are not identified and managed early.
Cannabis businesses in particular are exposed to numerous risks due to the fluid cannabis laws that regulate the industry. When seeking out an insurance policy for you marijuana business it is important to work with an insurance broker who is conversant with marijuana laws that apply at both the state and federal level.
How to Identify Business Risks
As a business the important step in learning how to manage a business risk is knowing the type of risks you are facing. Finding and identifying those risks means looking at all the aspects of your business. Different businesses use different methods to identify those problems but each method has to completely consider and analyze all activities of that business.
Many businesses use the: assess, control, and monitor method in order to identify the risks and others may use a top-down approach method which involves getting an insurance cover for your business.
Different types of risks facing business
Below are the common types of risks and how to manage them:
A financial risk is faced by a company in the manner that it handles its finances for example not paying loans on time, being slow in the delivery of the services it offers and hence losing out on money to grow the business.
It can also happen in terms of a business investing in a new venture and then losing all the money because there was no prior financial planning. This risk is about the financial stability of the business for example, can the company operate for a year without borrowing loans?
The best method of managing this risk is hiring a qualified financial chief planner who is going to handle all your business finances and advice on the areas to improve.
Operational risk arises from your company’s internal management and the decisions you make. This risk can completely bring your company down if not managed well. Operational risk also arises from the infrastructure of the business e.g. continuous power outages, failing to meet production targets, failing to deliver good on time and continuous making of low-quality goods.
A critical method of managing this risk is employing the qualified people for the different departments. Monitoring and assessing the work weekly and also diving the work to different people.
Another important way is reminding your employees about the organization’s values and culture. Also paying the workers on time means they will operate the business efficiently.
Information Technology Risks
Every modern business uses technology to run its operations. The main risk in technology is data breach and failure of software. Data breach can completely harm your business operations because all the personal information is out there. There is also the risk of the technology you are using to run your business failing and hence leading to unforeseen losses.
The first important method of mitigating this risk is hiring a qualified technology person that can identify all the security threats, analyze when there is software failure, and advice on the links not to use in the company’s website.
Human Resource Risks
The employees are the backbone of your company. The main risks in human resource are the workplace risk, the environment not being favorable to work in, employment compliant law risk, this is when your business does not follow the laid out rules of protecting your workers.
There is also the risk of losing out on the top talented employees if you are not paying them well and hence your company having a bad reputation.
The simplest way of managing this risk is ensuring that you are a fair employer that pays your workers well. Another easy method is providing incentives to the employees and giving them a favorable environment to work in and not overworking them.
Economic risk is inevitable in every business because it is external for example rising rates on loans, hiked raw production materials and fuel prices.
To manage this, you need to hire good management team that identify a looming financial crisis and hence prepare the business well. Having a good financial planner also means that he will give a strategy on how to utilize the company resources well.
Managing a business risks mainly involves understanding your business well and the risks you are facing. Each company experiences different risks and all the methods can’t work the same. You need to identify the ideal methods that suit your business.